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TMI Blog2019 (1) TMI 901X X X X Extracts X X X X X X X X Extracts X X X X ..... First Schedule to the Central Excise Tariff Act, 1985. Chewing Tobacco manufactured with the aid of packing machines and packed in pouches is notified under the Notification No 10/2010-CE(NT) dated 27.02.2010 issued under Section 3A(1) of the Central Excise Act, 1944(Excise Act) which deals with compounded levy scheme applicable to manufacturers of certain items, including Chewing Tobacco. 2.1 Appellant is operating under the Chewing Tobacco & Unmanufactured Tobacco Packing Machines (Capacity Determination & Collection of Duty) Rules, 2010 (CTD Rules for short) and paying duty on its products based on the periodic orders passed by the Deputy Commissioner determining the annual capacity of production of the Appellant (ACD Orders) under Rule 6(6) of the CTD Rules. 2.2 The ACD orders are based on the declarations under Form-1 submitted by the Appellant. Depending upon the demand for its products and other business exigencies, the Appellant discontinues production of various pouches of different Retail Sales Prices (RSPs) and commences manufacture of new RSPs. This led the Appellant requesting for sealing or unsealing of some or all its installed packing machines in accordance with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 30. 09. 12 16.09.12 to 30.09.12 2.7 Thus, during the period of dispute, Appellant was paying the Central Excise duty only for the days on which machines were lying unsealed and installed, by claiming the benefit of suo moto abatement under Rule 10 (for February 2012) and benefit of pro- rata duty calculation under 4th Proviso to Rule 9 (for April 2012 to September 2012) of the CTD Rules, for the number of days the machines were lying sealed and uninstalled. 2.8 In view of the aforesaid facts, Show Cause Notice dated 11.12.2012(SCN) was issued to Appellant, proposing demand of excise duty amounting to Rs. 2,77,25,177/- and recovery of the same under Section 11 A(1) of the Excise Act, along with interest under Section 11 AA ibid and penalty under Rule 17 of the CTD Rules. The SCN alleged, inter alia, that duty appears to be payable for the maximum number of machines operated during the month as per Rule 7 and 8 of the CTD Rules, thus, Appellant's practice of paying duty only for the days of the month for which the particular machine was operating appeared to be against the said legal provisions; that notwithstanding the stoppage of a particular machine for a part of the month, mac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder No. 51682/2018 dated 12.04.2018. The benefit for the period 01.10.2012 to 15.12.2012under Rule 10 had been allowed by the First Appellate Authority itself. However, the benefit under the 4th proviso to Rule 9 was not allowed, which was allowed by the Hon'ble CESTAT, New Delhi holding that the benefit of the 4th proviso to Rule 9 is applicable in cases, where the production of goods of a new RSP, which has not been earlier manufactured during the month, is commenced by the manufacturer, even if the goods bearing such RSP were being manufactured in the earlier months. Similarly, the benefit under 4th proviso to Rule 9 is also admissible in cases, where the production of goods of existing RSP is discontinued during the month, even if the production of such goods is again commenced in the succeeding months. 3.2 Thus, it is humbly submitted that the benefit of Rule 10 and 9 has been correctly claimed by the Appellant even during the relevant period and the impugned order denying the same is liable to be set aside. Duty demand not sustainable for February 2012 as the suo moto abatement claim made by the Appellant under Rule 10 of the CTD Rules was legal and proper. 3.3 In th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the aspect as to who shall abate the duty - whether Department has to grant the abatement by way of refund of the excess duty so paid or assessee can suo moto abate the duty by paying reduced duty on proportionate basis. Thus, it is submitted that the suo moto claiming of abatement by the Appellant in the present case is legal and proper in the absence of any express provision prescribing the procedure or restricting the same. 3.9 It is a settled legal position that suo moto abatement claim under Rule 10 of the CTD Rules is legally correct. For this, reliance is placed on the following authorities: * Trimurti Fragrances Pvt. Ltd. V. CCE, Delhi-III, 2015 (329) E.L.T.175 (TrL - Del.) * Zest Packers Pvt. Ltd v. CCE, Ahmedabad-II, 2015-TIOL-1866-CESTAT-AHM * Maa Vindhyavashini Tobacco Pvt. Ltd. V. CCE, Kanpur, 2017 (4) TMI 1119 -CESTAT ALLAHABAD * Circular No. 331/47/97-CX, dated 30.08.1997 4. The Hon'ble Tribunal in the case of Thakkar Tobacco Products Pvt. Ltd v. CCE, Ahmedabad-Il, 2015-TIOL-690-CESTAT-AHM has categorically held that suo moto claim under Rule 10 of the Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 [akin to R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade by the Hon'ble Tribunal in the case of Trimurti Fragrances (supra). 4.5 In the present case, the impugned order has not given any finding on the Appellant's contention of applicability of 4th proviso to Rule 9 in the instant case, but has merely confirmed the demand by observing that the Appellant should have paid the entire duty based on deemed production and should not have paid the reduced duty on proportionate basis. In this regard, it is submitted that the Appellant's case for the period from April 2012 to September 2012 falls within the purview of 4th proviso to Rule 9. The same is summarized below in a tabular form: - 4.6 Thus, in view of above, it is submitted that the Appellant was legally correct 'in paying duty on proportionate basis in terms of 4thproviso to Rule 9 and therefore, duty demand confirmed under Months of 2012 Machine No. Commencement of New RSP for the first time during the respective month Machine No. Discontinuation of existing RSP during the respective month April 23 5/-w.e.f. 19.04.2012 23 5/-w.e.f. 22.04.2012 25 3/-w.e.f. 12.04.2012 May 23 5/-w.e.f. 21.05.2012 23 5/-w.e.f. 26.05.2012 26 1.50/-w.e.f. 01.05.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the number of operating packing machines is to be determined, as per which the number of operating packing machines in a factory for a month shall be the maximum number of operating packing machines installed on any day during the month. * Though Rule 9 is titled 'Manner of Payment of Duty', however, the 4th proviso thereto is about re-calculation of duty in the circumstances when during a month, the manufacturer either permanently discontinues the manufacture of the goods of existing RSP or commences the manufacture of goods of new RSP. Thus, 4th proviso to Rule 9 qualifies the provisions of Rule 7 and 8. 6.1 It was further held in the said case that if the department's contention is accepted it would make Fourth Proviso to Rule 9 redundant. Thus, it was held that duty on machines installed w.e.f. 24.07.2013 for commencement of manufacture of goods of new RSP, should be charged for 8 days only in the month of July 2013. 6.2 Further, it is submitted that the Ld. Commissioner has wrongly interpreted 2nd proviso to Rule 8 in the impugned order inasmuch as the said proviso provides for treating an installed machine as operating during the period of installation even i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he only proviso for abatement is mentioned in Rule 10, but for invoking this rule - (a) the entire factory must be closed for a continuous period of 15 days or more; (b) during the period of closure there should not be any manufacturing activity whatsoever and no removal of goods by the manufacturers; and (c) prior intimation, at least three days prior to closure, must be given to jurisdictional Central Excise Officer who shall seal all the packing machines available in the factory in such a manner that the same cannot be operated during the period of closure. In the instant case, it is clear that the entire factory was not closed. A few machines were working and production was on. It is not the case of the assessee-Appellants that entire factory was closed for a continuous period of 15 days or more during which there was absolutely no manufacturing activity and no removal of the finished goods. Therefore, abatement under Rule 10 is not available. Hence, we are of the view that abatement under Rule 10 cannot be given in respect of individual machines which may have been sealed for a continuous period of 15 days or more, when during that period, other machines were functioni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ences manufacturing of goods of a new retail sale price during the month, the monthly duty shall be recalculated pro-rata on the basis of total number of days in that month and the number of days remaining in that month counting from the date of such commencement and the duty liability for the month shall not be discharged unless the differential duty is paid by the 5th of the following month and in case the amount of duty so re-calculated is less than the duty for the said month, the balance shall be refunded to the manufacturer by the 20th day of the next month, whereas Rule 8 provides in case of addition or installation or removal or un-installation of a packing machine in the factory during the month, the number of operating packing machine for the month shall be taken as the maximum number of packing machines installed on any day during the month. Further, the first proviso provides that in case a manufacturer commences manufacturing of goods of a new retail sale price during the month on an existing machine, it shall be deemed to be an addition in the number of operating machines for the month. Thus, the purport of Rule 8 by way of example is that on a particular machine 'a' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regarding the construction of the proviso has held as under :- "the general rule in construing a provision containing a proviso is to construe them together without making either of them redundant or otiose. Even if enacting part is clear, effort is to be made to give some meaning to the proviso and to justify its necessity. It is also settled preposition of law that the enacting part should be generally given such a construction which would make the exceptions carved out by the proviso necessary and the construction which would make construction unnecessary and redundant should be avoided." 9.1 If the Department's contention is accepted, it would make the Fourth Proviso to Rule 9 redundant, which in view of the above mentioned judgment of Hon'ble Bombay High Court is not permissible. The Fourth Proviso to Rule 9 clearly states that in case a manufacturer permanently discontinues the manufacture of goods of existing RSP, his monthly duty liability shall be re-calculated on pro rata basis of the total number of days in that month and the number of days remaining in that month counting from the date of discontinuation and in case the amount of duty is so recalculated is less th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the second machine only for the period when it was working. The appellant is not suppose to pay any duty for the period when machine was sealed. Hence, we direct the adjudicating authority to compute the period when the machine was working and raise the demand of duty and along with interest. The charging of the interest is mandatory as per the ratio laid down by the Hon'ble Supreme Court-CIT vs. Anjuman-252 ITR 1 (SC)" 10. Having considered the rival contentions and considering the precedent judgments, we hold that the ruling in the case of Shiv Shakti Agrifood Pvt. Ltd. Final Order No. 16/4/2018 is per incuriam as the said ruling has been passed without taking notice of the provisions of the Rule 9 Fourth Proviso and also the earlier precedent judgments of this Tribunal. 11. We also take notice that in a subsequent order under similar facts and circumstances with the same assessee Single Member Bench of this Tribunal in Final Order No. 51682/2018 dated 12th April 2018, has followed the earlier ruling of SA Freshner Pvt. Ltd. (Supra) and have held accordingly in favour of this appellant assessee. 12. So far as the issue is concerned, we find that Hon'ble Gujrat High Court i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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