2019 (3) TMI 663 - AT - Central Excise

Liability of duty - manufacture of Gutkha - Pan Masala Packing machines (Capacity Determination and Collection of Duty) Rules, 2008 effective from 01/07/2008 - demand on pro-rata basis for the factory closed on 03/07/2008 - Held that - In respect of clearance of goods during such stoppage of production and sealing of machinery, though no express provision or clarification is available as to if clearance of previously manufactured goods is to be included or excluded, in borrowing Rule 92 ZND dealing with procedure for claiming abatement on textiles vis- -vis Board s circular no. B.04.06.2001 dated 30.04.2001 whereby clarification was given that the stock of stentered fabrics lying in the factory could be allowed to be removed during the period of closure, which is conterminous to Rule 10 of Pan Masala Rules, he gave his findings that on removal of previously manufactured Pan Masala which is not included in the proviso dealing with such removal, the benefit of abatement granted under Rule 10 of the Pan Masala Rules can be extended to the Appellant. The said findings are upheld - appeal dismissed.

Summary

Issues:
Confirmation of duty liability under Pan Masala Packing machines Rules, 2008 on pro-rata basis for factory closure on 03/07/2008 challenged in appeal. Reduction of duty demand from one month to three days disputed by both parties.

Analysis:

1. Duty Liability and Factory Closure:
The appellant challenged the duty liability imposed under the Pan Masala Packing machines Rules, 2008 effective from 01/07/2008 on a pro-rata basis due to the factory closure on 03/07/2008. The appellant ceased production of Pan Masala and sealed its machines in compliance with the rules. The duty demand was initially set at &8377; 37,50,000 for the entire month of July 2008, later reduced to &8377; 2,93,563 on a pro-rata basis by the Commissioner (Appeals). The appellant contested this reduction, leading to appeals from both the appellant and the department.

2. Compliance with Rules and Duty Calculation:
The appellant's failure to comply with Rule 10 of the Pan Masala Rules, which allows for abatement if the factory does not produce goods for a continuous period of 15 days or more, was highlighted. The department argued that duty should be calculated based on the production capacity for the entire month since some manufacturing activity occurred on 1st July and goods were removed on 17th July. The appellant disputed this, asserting that no manufacturing took place after the rules came into effect on 01/07/2008, and the machines were sealed accordingly.

3. Interpretation of Rules and Proviso to Rule 10:
The appellant contended that the first proviso to Rule 10 stipulates that no manufacturing or removal of goods should occur during the closure period. The appellant argued that any removal of goods that were already manufactured and packed before the machine sealing should not be considered a violation of the rule. The appellant emphasized that no manufacturing took place after the rules came into effect, and the duty liability should not be imposed retrospectively.

4. Judicial Findings and Order Confirmation:
After hearing arguments from both sides and examining the relevant rules, the Tribunal upheld the Commissioner (Appeals)'s decision. The Tribunal found no irregularities in the Commissioner's order, which stated that the rules came into effect on 01/07/2008 and not on 02/07/2008 as contended by the appellant. The Tribunal also noted that the benefit of abatement under Rule 10 could be extended to the appellant for the clearance of previously manufactured goods during the closure period. Consequently, both appeals were dismissed, confirming the Commissioner (Appeals)'s order.

In conclusion, the Tribunal dismissed both appeals, upholding the duty liability calculation on a pro-rata basis for the factory closure and affirming the Commissioner (Appeals)'s decision regarding the application of the Pan Masala Packing machines Rules, 2008.