2018 (3) TMI 18 - AT - Central Excise

Interpretation of Statute - Pan Masala Packing Machines PMPM (Capacity Determination and Collection of Duty) Rules, 2008 - The department was of the view that the duty for the month of July, 2009 would come to ₹ 1,20,00,000/- (Rs. 24,00,000/- x 5) as per Rule 6 (4) readwith Rule 9 of the said Rules, whereas the appellants were of the view that they were required to pay duty of ₹ 85,16,130/- only, on pro-rata basis for the period 10/07/2009 to 31/07/2009, as per the fourth proviso to Rule 9 of the said Rules. Held that - under the PMPM Rules, the period of assessment is calendar month. It is evident from Rule 5 which provides for determination of capacity on monthly basis and the duty payable per machine is prescribed for each month. Further in several other rules, the reference to determination of duty, abatement of duty is with respect to month. On a conjoint reading of the rules as a whole particularly Rule 9 proviso 4, Rule 8 first proviso, Rule 6 (4), Rule 7, it is evident that the applicable rule in the facts of the present case is Rule 9 which provides for the monthly duty payable on notified goods shall be paid by the 5th day of the same month and an intimation in Form II shall be filed with the Jurisdictional Authority by 10th of the same month. Division Bench of this Tribunal in Trimurti Fragrances Pvt. Ltd. 2015 (8) TMI 34 - CESTAT NEW DELHI in the case of claim for abatement for the period of closure of the factory when the appellant paid the proportionate duty for the period factory was in operation and Department contended that appellant should have paid entire duty for the month and only thereafter should have claimed rebate, where the Tribunal has held that when a new RSP is introduced the fourth proviso to Rule 9 of the said rules would apply and that any other interpretation would make the said proviso redundant or otiose, which is not permissible by law. The view taken by Revenue is against the provisions of the PMPM Rules, 2008 readwith Section 3A of the Act - appeal allowed - decided in favor of appellant.

Summary

Issues:
Interpretation of Pan Masala Packing Machines Rules, 2008 for duty calculation based on production changes.

Analysis:
The case involves the interpretation of the Pan Masala Packing Machines [PMPM] (Capacity Determination and Collection of Duty) Rules, 2008, specifically regarding the duty calculation for manufacturers under a compounded levy scheme. The dispute arises from changes in production machinery and retail prices of the goods. The key issue is whether the duty payable by the manufacturer for a specific month should be recalculated pro-rata based on production changes during that month.

The appellants, engaged in Gutka manufacturing, were subject to the compounded levy scheme under the Central Excise Act, 1944. The duty calculation was based on the Pan Masala Packing Machines Rules, 2008, which deemed certain quantities of pouches manufactured per packing machine per month. The dispute arose when the appellants made changes in their production machinery and retail prices during July 2009, leading to differing views on the duty payable for that month.

The Adjudicating Authority and the Commissioner (Appeals) held that the duty should be calculated based on the deemed operation of machines producing goods at the new retail price for the entire month. However, the appellants argued that the duty should be paid pro-rata based on the period of production changes, citing the fourth proviso to Rule 9 of the said Rules.

The Tribunal analyzed the relevant rules, particularly Rule 9, which provides for the monthly duty payable on notified goods. The Tribunal emphasized the importance of recalculating duty pro-rata when a manufacturer commences manufacturing goods of a new retail sale price during the month, as per the fourth proviso to Rule 9. The Tribunal referred to a previous case to support the interpretation that the fourth proviso must not be rendered redundant, highlighting the necessity of applying it in cases of production changes during a month.

Ultimately, the Tribunal ruled in favor of the appellants, holding that the duty demand by the Revenue was against the provisions of the PMPM Rules, 2008. The impugned order was set aside, and the appeal was allowed, granting the appellants consequential relief in accordance with the law.