2015 (9) TMI 514 - AT - Central Excise

Refund claim - manufacture of Gutkha and Pan Masala - Reopening after Closure of factory due to banning the use of plastic pouches - Abatement under Rule 10 of Rules 2008 - Assessee reopened the factory - Held that - It is revealed from the letter dt.08.02.2011 of the Appellant, as referred above, that the Appellants had given intimation to the Assistant Commissioner of Central Excise that they closed down their factory due to the notification issued by the Ministry of Environment & Forest, Government of India, banning the use of plastic pouches with immediate effect. There is no dispute that the Superintendent of Central Excise was acted upon on the basis of intimation by letter dt.08.02.2011 and sealed the machine on 10.02.2011. Thus, on 10.02.2011, the Appellant closed down their factory. The intimation given by the Appellant to the Assistant Commissioner of Central Excise by letter dt.08.12.2011 would show that the Appellant permanently ceases to work in respect of all the machines installed in the factory and it would be followed for surrender of registration. Incidentally, by order dt.17.02.2011, the Hon ble Supreme Court directed that the ban will be effective from 01.03.2011. As per the direction of Hon ble Supreme Court, the Appellant re-opened the factory on 17.02.2011. The jurisdictional Superintendent of Central Excise, de-sealed the machines. In such a peculiar facts and circumstances of the case, in our considered view, the refund claim filed by the Appellant would come within the purview of Rule 16 of Rules 2008. - impugned order is liable to be set aside. Accordingly, it is set aside - Decided in favour of assessee.

Summary

Issues Involved:
1. Entitlement to refund of duty paid during the factory closure.
2. Interpretation and application of Rule 10 and Rule 16 of the Pan Masala (Packing Machine Capacity Determination & Collection of Duty) Rules, 2008.
3. Compliance with the notification banning the use of plastic pouches.
4. Application of the principle of natural justice and fair play.

Detailed Analysis:

1. Entitlement to Refund of Duty Paid During Factory Closure:
The appellants, engaged in manufacturing Gutkha and Pan Masala, closed their factory due to a notification banning plastic pouches. They sought a refund for the duty paid during the closure period. The adjudicating authority and Commissioner (Appeals) rejected the refund claim, citing Rule 10 of the Rules 2008, which requires a continuous closure period of 15 days for abatement. The appellants argued that their closure was due to compliance with the notification, and they were entitled to a refund on a pro-rata basis.

2. Interpretation and Application of Rule 10 and Rule 16 of the Pan Masala (Packing Machine Capacity Determination & Collection of Duty) Rules, 2008:
The Tribunal analyzed Rule 10, which provides abatement for non-production during a continuous period of 15 days or more, and Rule 16, which allows for recalculation of duty on a pro-rata basis if a manufacturer permanently ceases operations and surrenders registration. The Tribunal noted that Rule 16 starts with "Notwithstanding anything contained in these rules," indicating it overrides other provisions, including Rule 10. The Tribunal concluded that Rule 16 applied to the appellants' situation, as they had permanently ceased operations and informed the authorities.

3. Compliance with the Notification Banning the Use of Plastic Pouches:
The appellants closed their factory following the Ministry of Environment & Forest's notification banning plastic pouches. The Tribunal recognized that the closure was due to compliance with this notification, and the subsequent Supreme Court order delayed the ban's effect, leading to the factory's reopening. The Tribunal found that the appellants' actions were in response to regulatory requirements, justifying their claim for a refund.

4. Application of the Principle of Natural Justice and Fair Play:
The Tribunal emphasized the importance of natural justice and fair play. It noted that penalizing the appellants for reopening their factory following the Supreme Court's order would be unjust. The Tribunal held that the appellants should not be denied a refund due to the temporary nature of the closure, especially given the regulatory context and subsequent developments.

Conclusion:
The Tribunal set aside the impugned order, allowing the appellants' appeal and granting the refund for the duty paid during the factory closure. The judgment underscored the interpretation of Rule 16 over Rule 10, the compliance with regulatory notifications, and the principles of natural justice and fair play.