2015 (8) TMI 25 - AT - Central Excise

Benefit of abatement of duty - non-production of goods during any continuous period of 15 days or more - manufacture of Jarda Scented Tobacco and Chewing Tobacco - Held that - As regards the Board s circular dt.12.03.2009 stating that the abatements are subject to pre/post-audit, we do not necessarily see any fatally irreconcilable contradiction between the Board s circulars dt.15.09.1999 & 30.08.1997 on the one hand and the one dt.12.03.2009 on the other in as much as when the adjustment of abatement has been made, nothing prevents Revenue from auditing the correctness thereof. More importantly, the Board s circulars have no statutory force and have to be ignored to the extent they are in conflict with the judicial pronouncements. - claim of abatement under Rule 10 has no relation to determination of Annual Capacity of Production under Rule 6(2) of the said Rules 2010 and therefore, there is no question of challenging of order issued under Rule 6(2) of the said Rules 2010, while availing abatement under Rule 10. It is already observed that the expression in Rule 10 are clear that the manufacturer shall calculate the duty by reducing amount on a proportionate basis in respect of non-production of goods. Decision of the Tribunal in the case of Thakkar Tobacco Products Pvt.Ltd (2015 (2) TMI 606 - CESTAT AHMEDABAD) followed. It is noticed that the same view was taken by the Tribunal in the case of Trimurti Fragrances Pvt. Ltd & others (2015 (8) TMI 34 - CESTAT NEW DELHI) and Godfrey Philips India Ltd (2015 (8) TMI 35 - CESTAT NEW DELHI). Hence, the impugned orders cannot be sustained. - Accordingly, the impugned orders are set aside. - Decided in favour of assessee.

Issues Involved:

1. Whether the manufacturer can avail the benefit of abatement of duty suo motu under Rule 10 of the Chewing Tobacco and Unmanufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010.
2. Whether the abatement of duty is subject to the procedure of grant of refund as per Section 11B of the Central Excise Act, 1944.
3. The interpretation of the term "shall be abated" in Rule 10 and its implications on the manufacturer's right to abatement.
4. The relationship between the determination of annual capacity of production under Rule 6(2) and the availing of abatement under Rule 10.
5. The applicability of precedents and judicial pronouncements on the issue of abatement of duty.

Detailed Analysis:

1. Availment of Abatement Suo Motu:

The core issue was whether a manufacturer could independently avail the benefit of abatement of duty for non-production of goods for a continuous period of 15 days or more under Rule 10 of the Rules 2010. The appellants argued that Rule 10, read with the Proviso to Section 3A(3) of the Central Excise Act, 1944, allowed them to avail abatement suo motu. They cited previous tribunal decisions supporting their position. The Tribunal found that the language of Rule 10 was clear and unambiguous, allowing manufacturers to calculate and reduce duty proportionately for non-production periods, provided they filed the required intimation.

2. Procedure of Grant of Refund:

The Revenue contended that the abatement in Rule 10 was not automatic and required following the administrative procedure for refund as per Section 11B of the Act. The Tribunal disagreed, noting that Rule 10 did not stipulate the need for an application for abatement, unlike other rules where explicit provisions for refund were made. The Tribunal emphasized that the manufacturer's duty calculation should be reduced on a proportionate basis for non-production periods, as long as the manufacturer had filed the necessary intimation.

3. Interpretation of "Shall be Abated":

The Revenue argued that the expression "shall be abated" mandated the Department to determine the abatement of duty, implying that the manufacturer could not avail the benefit suo motu. The Tribunal, however, interpreted the phrase as indicating that the duty should be reduced proportionately by the manufacturer in case of non-production, provided the necessary intimation was filed. The Tribunal referenced several judicial pronouncements and Board circulars supporting this interpretation.

4. Relationship Between Rule 6(2) and Rule 10:

The Revenue argued that the abatement claim under Rule 10 was related to the determination of annual capacity of production under Rule 6(2), which required an assessment order. The Tribunal found no merit in this argument, stating that the claim of abatement under Rule 10 was independent of the determination of annual capacity of production under Rule 6(2). The Tribunal highlighted that the abatement was based on non-production periods and did not necessitate challenging the assessment order under Rule 6(2).

5. Applicability of Precedents and Judicial Pronouncements:

The Tribunal referred to several precedents, including decisions by the Tribunal and High Courts, which consistently held that substantial benefits like abatement could not be denied on procedural grounds. The Tribunal noted that the case law cited by the Revenue, such as Priya Blue Industries Ltd and Flock (India) Pvt. Ltd, were not applicable as they dealt with different contexts. The Tribunal affirmed the decisions in Thakkar Tobacco Products Pvt. Ltd, Trimurti Fragrances Pvt. Ltd, and Godfrey Philips India Ltd, which supported the appellants' position.

Conclusion:

The Tribunal concluded that the appellants were entitled to avail the benefit of abatement of duty suo motu under Rule 10 of the Rules 2010, provided they filed the necessary intimation. The impugned orders were set aside, and the appeals were allowed with consequential relief.

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