2015 (4) TMI 739 - AT - Central Excise

Duty liability in respect of pan masala retail pouches - pouch packing machine - whether the machine is to be treated as two track machine and hence it is to be treated as two machines or it is to be treated as single track machine - Held that - In a multi track machine, there are more than one parallel path traced by the pouches as they are formed and later filled and all the pouches in the same track follow the same path. The multiple track/multiple line machines operate with multiple rolls of laminate and the purpose of operating a multi line/multi track machine is to consolidate space and economise on electronic processors and machine operators. - The only innovation in this machine that on the same line or track at a time, two pouches are cut and filled as a result of which two pouches are formed, filled and sealed resulting in much higher speed of production of pouches. This is clear from the report dated 15/10/10 of IIT Professor Shri S. Sanghi of Applied Mechanical Department and Professor Shri S. Mukherjee of Mechanical Engineering Department of IIT, Delhi. This report also clearly classifies the machine, in question, as a single track duplex machine. In our view there is absolutely no basis for the Commissioner s finding that it is a multiple track machine. Just because the speed of this machine is much higher than the normal machines, it cannot be treated as a multiple track machine. The difference between the simplex and the duplex machine is in the speed multiple track or and in terms of the Board s Circular No. 980/4/14-CX dated 24/1/14 in case of a manufacturer operating machine at a higher speed as a result of which the actual production is more than the deemed production, as mentioned in Rule 5 of the PMPM Rules, no differential duty is to be demanded. When the PMPM Rules do not distinguish between the simplex FFS machine and the duplex FFS machines, though there is considerable difference between their speeds, and there is no provision that duplex is to be treated as two machines, Rule 5 of PMPM Rules and the Notification No. 42/08-CE cannot be interpreted to treat such a machine as two machines. - It is only in the year 2015 that by Notification No. 5/2015-CE (NT) dated 01/3/15, Rule 4 of PMPM Rules was amended to provide that maximum packing speed at which such packing machines can be operated for packing of notified goods of various RSPs would also be a relevant factor in addition to number of packing machines in a factory and Rule 5 of PMPM Rules was amended to specify deemed production of pouches per machine per month for different RSP slabs and different maximum operating speeds and Notification No. 42/08-CE was amended to provide different rate of duty per machine per month for different RSP slabs and different maximum operating speeds of the machines. But these provisions cannot be given retrospective effect, as these are not retrospective amendments - impugned order is not sustainable. The same is set aside. - Decided in favour of assessee.

Summary

Issues Involved:
1. Classification of the packing machine as single track or double track.
2. Determination of duty liability based on the classification of the machine.
3. Imposition of penalties on the appellant company and its officials.

Issue-wise Detailed Analysis:

1. Classification of the Packing Machine:
The main dispute revolves around whether the PK-90 GMP FFS machine should be classified as a single track or double track machine. The appellant company argued that the machine is a duplex model of a single track machine, which produces two pouches simultaneously on a single line. They emphasized that the machine uses a single laminate roll and operates on a single track, albeit with higher speed. The technical literature from the supplier and expert opinions from IIT professors supported this classification. The Commissioner, however, classified it as a double track machine based on its production speed, which is almost twice that of a simplex model.

2. Determination of Duty Liability:
The duty liability was determined based on the classification of the machine. The Commissioner held that the machine should be treated as a double track machine and confirmed a duty demand of Rs. 25,98,69,504/- along with interest and penalties. The appellant contended that the duty should be based on the number of packing machines as specified under the Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 (PMPM Rules) and Notification No. 42/08-CE. They argued that the machine should be treated as a single track machine, and higher production speed should not affect the duty calculation. The Tribunal agreed with the appellant, stating that the PMPM Rules and the Notification do not distinguish between simplex and duplex machines and that the machine should be treated as a single track machine.

3. Imposition of Penalties:
The Commissioner imposed penalties on the appellant company and its officials, including the CMD, Senior Vice President, Vice President (Purchase), General Manager (Procurement), and General Manager (Legal & Excise), as well as the Director of the machine supplier, under Rule 26 of the Central Excise Rules, 2002. The appellant argued that there was no justification for these penalties as the machine was correctly declared and inspected by the Jurisdictional Deputy Commissioner. The Tribunal found no basis for the penalties, as the classification of the machine as a single track was upheld.

Conclusion:
The Tribunal set aside the impugned order, holding that the PK-90 GMP FFS machine should be classified as a single track machine. Consequently, the duty demand and penalties imposed by the Commissioner were not sustainable. The appeals were allowed with consequential relief.