2016 (5) TMI 607 - AT - Central Excise

Manufacturing of Pan Masala / gutkha - Seeking abatement as per provisions of PMPM Rules 2008 - for the period when there was no production i.e. from 01.07.2008 to 16.07.2008 - Held that - the rule says that they have to give intimation at least 7 days prior non-production of goods in their factory. From the facts it is clearly proved that appellants had intimated well in advance to claim the benefit of this Rule and they were entitled to the facility of abatement in respect of non-production for 16 days in the month of July from 1st July to 16th July, 2008. In this regard it is to be noted that the appellants (their predecessor M/s Jalaram Industries) paid duty of ₹ 78,75,000/- for the month of July on 17.07.2008 for the production of 17.07.2008 to 31.07.2008 whereas the department assessed the duty for the month of July as ₹ 1,57,50,000/- without giving any abatement facility, which has been found to be not correct, when the appellants are entitled for the said abatement. Demand of excise duty - Manufacturing gutkha falling under CETA 2403990 - Period of dispute is 1st July 2008 to 16th July 2008 - Appellants took over the present manufacture unit from M/s Jalaram Industries, Bangalore, who surrendered their registration certificate and intimated the Department about their stopping of production work at the closing hours on 15.11.2008 - Held that - when it is found that the appellants are entitled to the abatement, the demand of ₹ 78,75,000/- confirmed by the impugned order under Section 11A of Central Excise Act read with Rule 9 of PMPM Rules 2008 does not stand scrutiny of law and is hereby, therefore, set aside. Demand of interest - Appellants pleaded that as they were not knowing when they will commence production, they paid duty for the whole month manufacture when they commenced production, which in this case is 17th July (after making adjustments for the abatement) - Held that - the laws and rules are same for everyone, whether it is the appellants or others, who are in the industry of manufacturing pan masala or other such items. The appellants cannot take the plea of not knowing when it will commence production when others in the same industry are to follow the same rules; the appellants therefore cannot claim any unfair advantage by taking this plea. Here the appellants delayed their payment for July by two days, when the Rule 9 of PMPM Rules 2008 fixes the responsibility of payment for the month of July as on or before 15th July 2008. There is clearly liability for payment of interest on the duty which was paid after the due date in the month of July 2008. This liability of interest on the said duty was confirmed by the impugned order and the same is hereby sustained under Rule 9 of PMPM Rules 2008 read with Sections 3A (2&3) of Central Excise Act 1944 is hereby sustained. Imposition of penalty - Section 11AC of the Act - Held that - when we are setting aside the main demand imposed by the impugned order there can not be imposition of any penalty under Section 11AC read with Rule 17 of PMPM Rules 2008 and penalty therefore, is hereby dropped. - Appeal disposed of

Issues Involved:

1. Liability of central excise duty for the period of non-production.
2. Entitlement to abatement of duty for the period of non-production.
3. Liability for interest on delayed payment of duty.
4. Imposition of penalty for short payment of duty.

Detailed Analysis:

1. Liability of Central Excise Duty for the Period of Non-Production:

The appellants, M/s Pan Parag India Ltd. (PPIL), took over the manufacturing unit from M/s Jalaram Industries and undertook to discharge any central excise duties/service tax liabilities that may arise. The central issue was whether PPIL was liable to pay the central excise duty for the period from 01.07.2008 to 16.07.2008 when there was no production. The Department issued a show-cause notice demanding ?78,75,000/- for this period, which was confirmed by the Commissioner. However, the Tribunal found that the appellants had informed the Department well in advance about the non-production and were entitled to abatement, thus setting aside the demand for this period.

2. Entitlement to Abatement of Duty for the Period of Non-Production:

The appellants claimed abatement for the period of non-production from 01.07.2008 to 16.07.2008. Rule 10 of the Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008, requires manufacturers to inform the Department at least seven days prior to the commencement of the non-production period to claim abatement. The Tribunal noted that the appellants had complied with this requirement and were entitled to abatement for the specified period. Consequently, the demand for ?78,75,000/- was set aside as the appellants were entitled to abatement.

3. Liability for Interest on Delayed Payment of Duty:

The appellants argued that they were not liable for interest as they did not know when they would commence production. The Tribunal referred to Rule 9 of the PMPM Rules, 2008, which mandates the payment of duty by the 5th day of the month. The Tribunal held that the appellants were liable to pay interest for the delayed payment of duty for July 2008, as they paid the duty on 17.07.2008 instead of the due date, 15.07.2008. The Tribunal sustained the liability of interest on the delayed payment of ?78,75,000/-.

4. Imposition of Penalty for Short Payment of Duty:

The Commissioner had imposed a penalty equivalent to the duty short-paid during July 2008 under Section 11AC of the Central Excise Act read with Rule 17 of the PMPM Rules, 2008. However, since the Tribunal set aside the main demand of ?78,75,000/-, it also set aside the penalty imposed. The Tribunal reasoned that without the main demand, the basis for the penalty did not exist.

Conclusion:

The Tribunal set aside the demand of ?78,75,000/- for the period of non-production from 01.07.2008 to 16.07.2008, granted abatement for this period, and confirmed the liability of interest for delayed payment of duty for July 2008. The penalty imposed was also set aside as the main demand was not sustainable. The appeal was decided in favor of the appellants on the main issue of duty demand and penalty, but the interest liability for delayed payment was upheld.

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