2016 (7) TMI 556 - AT - Central Excise

Refund - manufacturing of Gutka - Abatement in case of non-production of goods - closing of the factory - Held that - The Rule 10 of the Pan Masala Packing Machines Rules specifies that the intimation for closure should be, at least 7 days prior to the commencement of the period. The question which arises before us is whether this condition precedent is to be rigidly enforced. The only objection of the department is that the intimation for closure was not given three working days prior to commencement of the period of closure. We are of the view that when the purpose of giving prior intimation three working days prior to commencement of closure, is that the officers have enough time to seal the machines in the manner as prescribed in this rule, and this purpose has been achieved, as the sealing of the machines in the manner prescribed was done on 14-1-2013 in pursuance of the orders given by the Assistant Commissioner on 11-1-2013, the Conditions of the intimation of closure being given at least three working days prior to closure lose its significance and the benefit of abatement cannot be denied on the ground that intimation of less than three working days prior to closure. - Refund allowed - Decided in favor of assessee.

Summary

Issues:
- Refund claim for abatement under notification No. 30/2008-CENT
- Compliance with Rule 10 of Pan Masala Packing Machines Rules
- Appeal against refund order by Revenue
- Show cause notice for recalling refund
- Appeal challenging restriction of refund amount

Refund Claim for Abatement:
The appellant, a Gutka manufacturer, filed a refund claim of &8377; 4,62,90,323/- under notification No. 30/2008-CENT, citing closure of the factory for 16 days. The Assistant Commissioner sanctioned the refund, but the Revenue appealed, leading to the Commissioner (Appeals) restricting the refund to &8377; 30,24,194/-. The dispute revolves around compliance with Rule 10 of the Pan Masala Packing Machines Rules, requiring a 7-day prior intimation for closure of the factory for 15 days or more to claim duty refund.

Compliance with Rule 10:
The key issue is whether the 7-day intimation requirement under Rule 10 is mandatory for refund eligibility. The appellant's intimation for factory closure was filed 6 days prior to the 16-day closure period, falling short by a day. The Commissioner (Appeals) restricted the refund to 15 days due to this deficiency. The appellant argued for full refund, citing a precedent upheld by the High Court, emphasizing substantial compliance over technical deficiencies.

Appeal Against Refund Order:
The Revenue appealed against the refund order, contending that the appellant did not meet the mandatory 7-day intimation requirement, thus justifying the restriction of the refund amount. The debate centered on whether strict enforcement of the notice period is necessary for refund eligibility under the Pan Masala Packing Machines Rules.

Show Cause Notice for Recalling Refund:
Separately, the Commissioner initiated proceedings to recall the entire refund amount of &8377; 4,62,90,323/-, but later dropped the show cause notice. The Revenue appealed against this decision, adding another layer of complexity to the case.

Appeal Challenging Restriction of Refund Amount:
The appellant filed a third appeal challenging the Commissioner (Appeals) order restricting the refund to &8377; 30,21,194/-. The argument focused on the interpretation of Rule 10 and the significance of the 7-day prior intimation requirement for claiming duty refund. Ultimately, the Tribunal upheld the full refund, emphasizing substantial compliance and precedent set by the High Court.