2024 (3) TMI 4 - AT - Central Excise

Redetermination of annual production capacity w.e.f. 01.11.2012 in terms of Rule 6 of Chewing Tobacco and Unmanufactured Tobacco Packing Machines (Capacity Determination And Collection of Duty) Rules, 2010 - seeking to declare the packing machines as uninstalled and sealed - HELD THAT - Rule 4 of CER says that number of operating packing machines during any month shall be equal to the number of packing machines installed in the factory and if the manufacture doesn t intent to operate any of those machines, Rule, 5 prescribes that uninstallation and sealing as well as removal from the factory premises was to be done by and under the supervision of Superintendent of the Central Excise but it s proviso permits nonremoval from the factory premises only when it is not feasible to remove and in such an event it has been to be un-installed and sealed by the Superintendent in a manner that it can t be operated. It is not understood as to why Appellant was fastened with the liability to pay duty on the basis of number of packing machines available with him, when its uninstallation and sealing were duly made and Rule 8 is not violated, since calculation of the number of operating packing machines for a month is restricted to the maximum number of packing machine installed , apart from the fact that Circular No. 81/17/2007/CX-3 dated 20.04.2010, relied upon by the Appellant, issued by the Respondent-Department dictates not to take machines sealed by the Departmental Officer for the purpose of calculation of payment of duty. The order passed by the Commissioner of Central Excise (Appeals), Pune-III is hereby set aside - Appeal allowed.

Summary

Issues involved:
The issues involved in the judgment are the redetermination of annual production capacity, duty demand confirmation based on machine operation, and the interpretation of relevant rules regarding packing machines in the context of excisable goods production.

Redetermination of annual production capacity:
The Appellant requested redetermination of annual production capacity by declaring packing machines as uninstalled and sealed, leading to a duty demand confirmation based on the capacity of two machines. The Appellant contended that the re-determination should have resulted in a nil capacity from November 1, 2012, as per Rule 6(2). The Appellant argued that duty confirmation was improper as it was beyond the prescribed period for modification by the Revenue Authority, citing a previous Tribunal decision on a similar case.

Duty demand confirmation based on machine operation:
The Respondent confirmed duty demand by considering the number of operating packing machines as the maximum number installed on any day during the month, even if some machines were non-working. The Respondent relied on Rule 8(2) which deems non-working machines as operating machines for the month. The Appellant argued against this interpretation, stating that the machines were uninstalled and sealed, thus not operational.

Interpretation of relevant rules regarding packing machines:
The Tribunal analyzed the relevant rules, including Rule 4 which equates the number of operating packing machines to the number installed in the factory. The Appellant had indicated non-feasibility of removing the machines from the factory premises, requesting sealing to prevent operation. The Tribunal found that the Appellant should not be liable for duty based on the number of available packing machines, as the machines were sealed and uninstalled as per Rule 5. The Tribunal also considered Circular No. 81/17/2007/CX-3, which advises against including sealed machines in duty calculations.

Outcome:
The Tribunal allowed the appeal, setting aside the order of the Commissioner of Central Excise (Appeals) and providing consequential relief to the Appellant. The decision was pronounced in open court on February 27, 2024.