2018 (10) TMI 80 - AT - Central Excise

Refund of excise duty paid - Compound levy scheme for SS Patta/ Patti - abatement on pro-rata basis - refund claimed on the ground that they have paid the excise duty for the entire month of November 2016and February 2017 whereas the cold rolling machines operating during those months were dismantled - refund was rejected on the ground that the appellant have not opted for the first time under the compounded levy scheme in both these months and as such the conditions of the impugned notification remains unfulfilled. Whether the refund claim of the proportionate Central excise duty deposited for the non working period of newly added machines is admissible to appellant, or otherwise? Held that - The appellant had applied for addition of cold rolling machines and the permission were granted by the superintended Jodhpur. It is thereafter that the appellant filed the impugned refund claim for duty deposited for the non working period of machines. The aforesaid notification has been issued under the provisions of Rules 15 of Central Excise Rules, 2002. Said rule provides for special procedure for payment of duty on the basis of such factors as may be relevant to production of such goods. This notification gives an option to the manufacturer of SS Patta/ Patti which are subjected to the process of cold rolling, whereby assessee can pay excise duty on the basis of no. of cold rolling machines installed for cold rolling of those goods. Since this notification is issued under Central Excise Rules the provision thereof cannot be construed in the manner which is against Central Excise Act. Rule 3 of Central excise Act 1994 says that the duty is leviable on the manufacture of the excisable goods. Hence, when no cold rolling machine was installed or any of the machine was not operational question of payment of duty including such non-operational/ non-installed machine shall not arise. The decision in the case of Jupiter Industries 2006 (4) TMI 164 - HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR squarely applies to the appellant wherein it was held that payment of duty after dismantling of machines and discontinuance of production is not contemplated by Rule 96 ZB and 96 ZB(2) of Central Excise Rules, 1944. Sub Rule 2 of Rule 96 ZB lays down the method of calculation of sum payable. It was held that these rules in no way stipulates that any sum at the compounded rate is payable towards duty for the machine which is not in existence with the manufacturer nor does it say that no refund claim can be made with regard to excess payment made - The decision is squarely applicable in the instant case where the appellant had paid the duty for the months of November to February despite that all cold rolling machines were not operating for certain no. of days, during the month of November 2016 to February 2017. The appellant is entitled for the proportionate refund of duty for the days when the cold rolling machines were not operational - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Admissibility of refund claim for proportionate excise duty deposited for non-working period of newly added machines under special compound levy scheme.

Analysis:
1. The issue in this case revolves around the admissibility of a refund claim for the proportionate Central excise duty deposited for the non-working period of newly added machines under a special compound levy scheme. The appellant, engaged in the manufacture of Stainless Steel patta/patti, filed a claim for refund for duty paid during specific months when the cold rolling machines were not operational. The claim was rejected by the original adjudicating authority and the subsequent appeal was also dismissed, leading to the present appeal before the CESTAT.

2. The appellant contended that they were wrongly demanded duty on non-operating machines, contrary to the provisions of the notification governing the compound levy scheme. They relied on a decision of the Hon'ble High Court of Rajasthan to support their argument. On the other hand, the Departmental Representative justified the order, emphasizing that the appellant's situation differed from the case cited by the appellant, as the present matter involved a refund claim for non-working machines.

3. The CESTAT analyzed the relevant notification, which outlined the conditions and procedures for the compound levy scheme. The notification specified the duty liability calculation for manufacturers opting for the scheme for the first time. The CESTAT observed that the appellant had applied for the addition of cold rolling machines, and permission was granted accordingly. The notification was issued under the Central Excise Rules, providing a method for duty payment based on relevant production factors.

4. The CESTAT further delved into the legal framework, highlighting the Central Excise Act's provision that duty is leviable on the manufacture of excisable goods. Considering this, the CESTAT concluded that if no cold rolling machine was installed or operational, the duty payment for such non-functional machines should not be demanded. The interpretation adopted by the lower authorities, stating that the appellant did not opt for the scheme for the first time during the relevant months, was deemed unsustainable by the CESTAT.

5. Drawing support from the decision in Jupiter Industries case, the CESTAT emphasized that the payment of duty after the dismantling of machines and discontinuation of production was not envisaged by the Central Excise Rules. The rules did not mandate payment for machines not in existence or operational. The CESTAT highlighted that the rules allowed for refund claims under specific provisions of the Central Excise Act, and manufacturers could opt for special procedures, which did not cover payment for non-operational machines.

6. Ultimately, the CESTAT held that the appellant was entitled to a proportionate refund of duty for the period when the cold rolling machines were not operational. The order rejecting the refund claim was set aside, and the appeal was allowed in favor of the appellant. The judgment provided a comprehensive analysis of the legal provisions, precedents, and factual circumstances, leading to a clear and reasoned decision in the matter.