2017 (12) TMI 150 - AT - Central Excise

Abatement - closure of factory - manufacture of Pan Masala - compounded levy scheme - whether the appellant who were manufacturer of Pan Masala and operating under the compounded levy scheme whether they are entitled to abatement for closure of a part of their factory or some of the machines and not all machines during a particular month? - Held that - proviso 4 to Rule 9 of PMPM Rules read with Section 3A (2) clause B read with proviso provides for a charging of duty on proportionate basis, in case of alteration of annual production capacity and further the 4th proviso of Rule 9 of the PMPM Rules specifically provides that duty shall be recalculated pro rata on the basis of number of days in that month during which a machine was in operation due to addition or not in operation due to discontinuation and the said proviso specifically provides that an assessee will not be considered to have discharged the duty liability unless the differential duty is paid by the 5th of the following month if any additional duty is payable due to alteration and further provides that if any excess is paid upon recalculating the same shall be refunded to the manufacturer by the 20th of the following month. The statute has provided specific provision for adjustment of duty - also, the appellant is entitled to rebate/refund of the excess duty paid during the period of closure of their packing machine during the month of July, 2009 as admittedly the said machine remain uninstalled for a continuous period of more than 15 days as required under the Rules. The appellant shall be entitled to interest on the amount of refund/ rebate from 20.09.2009 - appeal allowed - decided in favor of appellant.

Summary

Issues:
Entitlement to abatement for closure of part of factory or machines under compounded levy scheme.

Analysis:
The appeal addressed the issue of whether the appellant, a manufacturer of Pan Masala under the compounded levy scheme, was entitled to abatement for the closure of a part of their factory or some machines during a particular month. The appellant produced Pan Masala of different MRPs, with one machine operating for MRP of ?24 per pouch. The machine was uninstalled and sealed on 23.06.2009, remaining out of operation for a significant period. The appellant sought a refund based on the closure of this machine for more than 15 days in July 2009. The Deputy Commissioner rejected the claim, leading to an appeal before the Commissioner (Appeals), who also dismissed it. The appellant then appealed to the Tribunal.

The appellant's counsel highlighted Section 3A of the Act, which allows compounded levy under specific circumstances in the interest of revenue. The relevant provisions specified factors for calculating annual production capacity and duty abatement in case of non-production for 15 days or more. The PMPM Rules, 2008, detailed the factors relevant to production, duty calculation, and payment procedures. Notably, Rule 10 allowed duty abatement for non-production exceeding 15 days, subject to prescribed conditions.

The Revenue argued that since only some machines in the factory were affected, not the entire factory, the rebate was rightly denied under Rule 10. However, the Tribunal found the lower courts' view conflicting with the statutory provisions. Proviso 4 to Rule 9 and Section 3A(2) clause B with proviso allowed duty recalculations on a proportionate basis for alterations in production capacity. The Tribunal noted the specific provisions for duty adjustments and ruled in favor of the appellant, granting them the refund of excess duty paid during the machine closure in July 2009.

The Tribunal allowed the appeal, setting aside the lower court's decisions and directing the refund of excess duty paid during the machine closure. The appellant was entitled to consequential benefits and interest on the refund amount from the date of application. The judgment emphasized the statutory provisions' clear intent for duty adjustments in cases of machine closures, ensuring the appellant's entitlement to the refund under the law.