2017 (11) TMI 701 - AT - Central Excise

Valuation - Compounded Levy Scheme - second machine which was closed from time to time - Department is asking the duty for the full months under the compound levy scheme. The claim of the appellant is that duty is not payable on the second machine for the period when it was sealed by the department till reopened by the department - Held that - The assessee deposited the duty amount for the month of July in advance vide e-receipt - As per the composite scheme, for production of pan masala and gutka, duty is payable. When there is no production due to sealing of the machine (as in the instant case), the factory cannot be considered closed completely as one machine was continuously working. So, Rule 10 is not applicable to the present case. The appellant will have to pay the duty on the second machine only for the period when it was working. The appellant is not suppose to pay any duty for the period when machine was sealed - the adjudicating authority directed to compute the period when the machine was working and raise the demand of duty and alongwith interest - appeal allowed by way of remand.

Summary

Issues:
Interpretation of compound levy scheme under Central Excise Tariff Act, 1985 for pan masala and gutka manufacturing; Dispute over duty payment for a sealed machine under the scheme; Application of Rule 8 and Rule 10 of Pan Masala Packing Machine Rules, 2008; Prorata refund under Rule 9 in case of permanent discontinuation of manufacturing; Duty liability during the period of machine sealing; Legal interpretation of machine operation and duty payment.

The judgment revolves around the interpretation and application of the compound levy scheme under the Central Excise Tariff Act, 1985 for the manufacturing of pan masala and gutka. The appellant was availing this scheme but faced a dispute regarding duty payment for a second machine that was sealed by the department for certain periods. The appellant argued that duty should not be payable for the sealed machine during the closure periods. The appellant contended that the sealed machines, if compliant with the prescribed sealing and unsealing procedures, should not be considered as installed machines for duty payment purposes during the sealed period.

The appellant relied on legal precedents, such as the case of Commissioner Vs. Thakkar Tobacco Products P. Ltd., to support their argument that duty liability does not arise when machines are sealed and no manufacturing operation is taking place. Additionally, the appellant cited the case of Taste Well Product Vs. CCE&ST, New Delhi, to emphasize that no duty liability arises when manufacturing operations are halted due to machine sealing. The appellant requested the impugned order to be set aside based on these legal arguments and precedents.

On the other hand, the department argued that as per Rule 9 of the Pan Masala Packing Machine Rules, 2008, a prorata refund is granted if a manufacturer permanently discontinues goods manufacturing. The department contended that under Rule 10, the appellant was required to deposit the entire duty on the second machine and then file a refund claim for the sealed period. The department's position was based on the specific provisions of the Rules regarding duty payment and refund procedures.

The Tribunal analyzed the facts and arguments presented by both sides. It was observed that the second machine in question was operational for a specific period, during which duty was paid, and sealed for the remaining time. The Tribunal determined that duty payment was required only for the operational period of the machine, not during the sealing period when no manufacturing took place. The Tribunal directed the adjudicating authority to calculate the duty demand for the operational period and charge interest accordingly, following legal precedents mandating interest payment. The impugned order was modified, and the matter was remanded to the Adjudicating Authority for further computation and refund processing if applicable.

In conclusion, the Tribunal allowed the appeal by way of remand, emphasizing the need for a detailed calculation of duty liability based on machine operation periods and providing a reasonable opportunity for the appellant to be heard. The decision highlighted the importance of adhering to legal provisions and precedents in determining duty obligations and refund claims under the compound levy scheme for pan masala and gutka manufacturing.