2013 (4) TMI 1 - AT - Central Excise

Pan Masala and Gutka - Duty based on capacity of production - Period of stoppage - Abatement under Rule 10 - Held that - for claiming abatement under Rule 10, there must be total stoppage of the machines which have to be sealed in such a manner that same cannot be operated and besides this, there should be no clearances of any specified goods during the period of stoppage of production for which abatement has been claimed. - it is not the case of the appellant that during the period of abatement, there was total stoppage of production and clearances. In respect of certain periods, for which abatement has been claimed, the Department s allegation is that period of non-production is less than 15 days, an allegation which has not been refuted by the appellant. Under Rule 7, the duty payable for a particular month is to be calculated by applying appropriate rate of duty specified in Notification No. 42/2008-C.E., to the number of operating packing machines in the factory during the month - From Rule 8, it is clear that even if the number of operating packing machines have been changed during the month or that some machines were not working during the entire month, the number of operative packing machines shall be taken as the maximum number of packing machines installed on any day during the month and even if, a machine was not working for certain periods in a month, the same shall be deemed to be operating packing machines for the entire month The provisions of Pan Masala Packing Machines Rules, 2008 cannot be interpreted from the language used in the Notification No. 42/2008-C.E., more so, when in terms of para 2 of the Notification No. 42/2008-C.E., the number of packing machines shall be determined in terms of Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 and in view of the second proviso to Rule 8, even if an installed packing machine was not working during a month, the same shall be deemed to be operating packing machines during the whole month and accordingly duty in respect of that machine would be charged as if it had been operated during the entire month and not for a fraction of the month for which it was actually operational. We, therefore, are of the prima facie view that on this point also, the appellant have not been able to establish prima facie case in their favour. This is not a case for total waiver from the requirement of pre-deposit. - Stay grated partly.

Summary

Issues Involved
1. Abatement claims under Rule 10 of the Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008.
2. Calculation of duty payable under Rules 7 and 8 of the Pan Masala Packing Machines Rules, 2008.
3. Compliance with pre-deposit requirements for hearing the appeals.

Issue-wise Detailed Analysis

1. Abatement Claims under Rule 10
The appellants filed six abatement claims totaling Rs. 3,91,90,765/- for various periods, which were initially allowed by the jurisdictional Dy. Commissioner. However, the Commissioner later contested these abatements, arguing they were wrongly allowed because the factory closure periods were less than 15 days or, even if they were 15 days or more, the appellant continued making clearances of specified goods. Consequently, the Commissioner confirmed a duty demand of Rs. 3,91,19,765/- against the appellant along with interest. The appellant contested this order, arguing that the abatement was correctly allowed as per Rule 10, which does not require all machines to be shut down if the manufacturer produces goods of different MRPs.

2. Calculation of Duty Payable under Rules 7 and 8
During the scrutiny of ER-I Returns for the period from September 2008 to July 2009, it was found that the appellant altered the number of operating machines during the month and paid duty on a pro-rata basis for the days the machines were operational. The department argued that this practice violated Rules 7 and 8, which require the duty to be calculated based on the maximum number of packing machines installed on any day during the month, and non-working machines are deemed to be operating for the entire month. A show cause notice was issued, and the Commissioner confirmed a duty demand of Rs. 8,59,46,469/- along with interest, appropriating an amount of Rs. 3,13,21,629/- already paid by the appellant. The appellant argued that the duty should be proportionately reduced for machines not operated throughout the month, but the department maintained that Rule 8 clearly states non-working machines are deemed to be operating for the entire month.

3. Compliance with Pre-deposit Requirements
The Tribunal considered the submissions from both sides and concluded that the appellant did not have a prima facie case in their favor for either the abatement claims or the duty calculation issues. Consequently, the Tribunal directed the appellant to make a pre-deposit of Rs. 3 Crores in addition to the amount already deposited for each appeal. Compliance with this pre-deposit requirement was to be reported on 4th April 2012, and upon compliance, the pre-deposit of the balance amount of duty and interest would be waived, and recovery stayed until the disposal of the appeals.

Conclusion
The Tribunal's judgment emphasized strict adherence to the provisions of the Pan Masala Packing Machines Rules, 2008, particularly Rules 7, 8, and 10. The appellant's practices of altering the number of operating machines and claiming abatement for partial shutdowns were found to be inconsistent with these rules. The Tribunal required significant pre-deposits to ensure compliance and safeguard the interests of Revenue.