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TMI Blog2022 (12) TMI 1141X X X X Extracts X X X X X X X X Extracts X X X X ..... , as the appellant filed declaration regarding change of number of packing machines and the declaration was accepted by the proper officer after due verification, the declaration was accepted and the annual capacity of the machine was fixed by the competent jurisdictional officers and the appellant accordingly paid the duty. The same is also clear from the following correspondences. There is no misdeclaration found by Revenue on the part of appellant regarding number of machines used for manufacture of notified goods. In such circumstance demands of duty over and above the duty determined by the Jurisdictional officer legally not correct. It is clear the duty is payable on the number of installed machines which are deemed to be operating machines. In the present matter the number of installed machines in the month remained the same before and after replacement of the machines. Therefore, the demand confirmed by the Learned Commissioner in instant case is legally not correct. In the present matter Revenue cannot demand duty unless the orders of determination of production capacity based duty has been reviewed. In the present case, it is seen that the Appellant after following ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded during the months of April 2009 and June 2009 respectively, on pro-rata basis from their date of installation. The Appellant also paid differential Central Excise Duty amount of Rs. 3,25,000/- in respect of two packing machines, converted from Pan Masala to Pan Masala Containing Tobacco (Gutka) during the Month of July 2009 on pro-rata basis from the date of conversion. Further it appeared that Appellant have submitted revised declaration in Form-1 on 05.09.2008, 19.05.2009 with department as per the Rule 6(6) of the Pan Masala Packing Machines (Capacity Determination and Collection Duty), Rules, 2008 for replacement of some existing packing machines during the month of September 2008, February-2009, May -2009 and June -2009 respectively for manufacture of aforesaid products. The New packing machines were added in the production area of the appellant by removal of old packing machines as permitted by the jurisdictional officers. However, investigation reveal that the Appellant has not paid any Central Excise Duty in respect of the new packing machines added during the relevant month on the ground that the number of old packing machine have been replaced with equal number mach ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vt. Ltd. Vs. UOI 2017(352)ELT 455 (Guj) Sunrise Remedies Vs. UOI -2019(366) ELT 49 (Guj) 3.1 He also submits that the annual capacity of production is determined by the Deputy Commissioner under Rule 6(3) of the PMPM Rules. If there is any change in the parameters declared by the manufacturer, the Deputy Commissioner has to approve fresh declaration and re-determine the annual capacity of production under Rule 6(6) of the PMPM Rules. The Deputy Commissioner has re determined the annual capacity of production and passed capacity determination order under Rule 6(6) stating that there will be no change in the capacity of production. The capacity was re determined taking into account the number of machines installed in the factory. The Appellant has paid duty on number of machines was that were considered by the Deputy Commissioner for re-determination of annual capacity. There was no short payment of duty in terms of the capacity determination Orders. 3.2 Capacity Determination Orders have been passed by the Learned Deputy/ Assistant Commissioner under Section 3A of the Central Excise Act and are appealable order Section 35 of Central Excise Act. In the present matter cap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for a provision for replacement of the machines as Rule 6 of the PMPM Rules covers the issue of replacement also. The demand is unsustainable and ought to be set aside. 3.4 He also submits that demand of Rs. 98,37,500/- on addition of machines in the middle of the month not sustainable. Appellant added / installed machines in the factory in the middle of the month udder Rule 6(6) and Deputy Commissioner passed Capacity Determination Order directing appellant to deposit duty on pro rata basis from the date of installation of the machines. The revised capacity determination order did not revise the annual capacity from the beginning of the month in which new machines were added. The duty in terms of Rule 7 was deposited by the Appellant 3.5 He also argued that there is no error in the capacity determination order which have determined the annual capacity of the added machines. Section 3A of the Central Excise Act provide for pro rata determination of annual capacity where there is a change in declared parameters. The Capacity determination orders determined the Annual capacity on pro rata basis in terms of Section 3A. Rule 8 of the PMPM Rules cannot be interpreted to contradict ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the notified goods as provided in Rule 10. It should be appropriate at this juncture to re-visit the legal provisions. Section 3A of the Central Excise Act, 1944 reads as follows :- SECTION 3A : Power of Central Government to charge Excise duty on the basis of capacity of production in respect of notified goods. - (1) Notwithstanding anything contained in section 3, where the Central Government, having regard to the nature of the process of manufacture or production of excisable goods of any specified description, the extent of evasion of duty in regard to such goods or such other factors as may be relevant, is of the opinion that is necessary to safeguard the interest of revenue, specify, by notification in the Official Gazette, such goods as notified goods and there shall be levied and collected duty of excise on such goods in accordance with the provisions of this section. (2) Where a notification is issued under sub-section (1), the Central Government may, by rules, - (a) provide the manner for determination of the annual capacity of production of the factory, in which such goods are produced, by an officer not below the rank of Assistant Commissioner of Ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s hundred per cent export-oriented undertaking shall have the meanings assigned to it in section 3. 5.1 In pursuance to the aforesaid section, the Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 has been framed vide Notification No. 30/2008-C.E. (N.T.), dated 1-7-2008 and pan masala and Gutakha has been notified for the purpose of Section 3A. As per the said rules, the factor relevant to production of the individual goods shall be the number of packing machines in the factory of the manufacturer. The quantity of notified goods deemed to be produced is dependent on the number of pouches per packing machine per month which in turn is dependent on the retail sale price per pouch. Thus, the quantity deemed to be produced is dependent upon the number of packing machines operating as well as the retail sale price. The manufacturer operating under the scheme has to file a declaration under Rule 6 of the Rules wherein he has to declare the number of packing machines of various types installed in the factory and intended to be operated for the production of the notified goods. The manufacturer also has to declare the retail price of the pouches ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... giving a definite shape to such pouches. (a) Number of multiple track or multiple line packing machine, which are incapable of performing additional processes specified in (iv). (v) Number of multiple track of multiple line packing machines out of (iv) and (iv)(a), which are installed in his factory. (vi) Number of multiple track or multiple line packing machines out of (v), which he intends to operate in his factory for production of notified goods. (vii) Name of the manufacturer of each of the packing machine, its identification number, date of purchase and the maximum packing speed at which they can be operated for packing of notified goods of various retails sale prices. (viii) Description of goods to be manufactured including whether pan masala or gutkha or both are to be manufactured, their brand names, etc. (ix) Retail sale price of the pouches to be manufactured during the financial year. (x) The plan and details of the part or section of the factory premises intended to be used by him for manufacture of notified goods of different retail sale prices and the number of machines intended to be used by him in each of such part or section, to the Deputy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e annual capacity of production following the procedure specified in sub-rule (2) 5.9 Thus, it is noticed that a detailed and exhaustive procedure has been provided for determination of the annual capacity as well as the procedure for any change in the number of machines or retail sale price etc., resulting into enhancement or reduction of liability under the Act. This is in conformity with the 2nd proviso to Section 3A(2)(b) read with Section 3A(3) of the Act, wherein it is provided that in case the factor relevant to the production is altered or modified (i.e. number of packing machines or RSP) at any time, during the year, the annual production shall be re-determined on a proportionate basis. Further, the duty shall be levied at such rate, on the unit of production or as the case may be, on such factor of production, as may be notified. 5.10 Further, Rule 7 provides that the duty payable for a particular month shall be calculated by application of the appropriate rate of duty specified in the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 42/2008-C.E., dated 1-7-2008 to the number of operating packing machines in the factory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal machines in the factory w.e.f. 16.04.2009 at 6,28,99,2000 Pouches per annum and assessing the duty liability for 15 days w.e.f. 16.04.2009 to 30.04.2009 at Rs. 87,50,000/ (v) Accordingly the Appellant paid the duty assessed by the Deputy Commissioner. (vi) Similarly, Appellant vide letter dated 09.07.2009 informed the Deputy Commissioner that they wish to convert 2 Nos of pouch packing machines of Pan Masala into Manufacturing of Gutkha. (vii) The Appellant also filed declaration in Form I as required under Rule 6 of the PMPM Rules 2008. (viii) Vide Panchanam dated 17.07.2009 the 2 pouch packing machines were converted to manufacturing of Gutkha in the Appellant s premises (ix) Order F.No.V/16-10/CTC/08-09/Pt II/1553 dated 16.07.2009 was passed by the Deputy Commissioner fixing the Annual Capacity of production for the 2 additional machines in the factory w.e.f 17.07.2009 at 1,12,32,0000 Pouches per annum and assessing the duty liability for 15 days w.e.f. 17.07.2009 to 31.07.2009 at Rs. 3,25,000/-. (x) As per the said order appellant paid the duty assessed by the Deputy Commissioner. (xi) Appellant vide letter dated 09.06.2009 informed the Deputy Commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is shall be abated in respect of such period provided the manufacturer follows the procedure laid down therein. In the instant case, the authority below has denied the abatement stating that conditions are not satisfied. It is not disputed that the appellant paid duty as per the annual capacity of production determined by the Jurisdictional officers. It is also not disputed that the machines were neither installed nor operated during the disputed period for which revenue demanded duty. Rule 10 provides that appellant is eligible for abatement during the period for which goods were not produced if such period is not less than 15 days. In this case, if appellant has paid duty for whole month, as per compounded levy scheme, this Rule would help the appellant to get abatement for the period when goods are not produced. This is because no duty can be demanded when goods are not produced in the peculiar facts of this case. Therefore considering Rule 10 also, we are of the view that the appellants are entitled to abatement. The issue is covered by the judgment laid by Hon ble Rajasthan High Court in the case of CCE, Jaipur-II v. Jupiter Industries reported in 2006 (206) E.L.T. 1195 (Raj.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the Central Excise officers. In this regard Rule 6(5) provides that the machine(s) which the manufacturer does not intend to operate shall be uninstalled and sealed by the Superintendent of Central Excise and removed from the factory premises under his physical supervision, provided that where such packing machines is not feasible to remove such packing machine out of the factory premises, it shall be uninstalled and sealed by the Superintendent in such a manner that it cannot be operated. In the present matter there is no dispute that the old machines were uninstalled by the Jurisdictional officers. The procedure for addition and removal of machines prescribed under PMPM Rules was followed. Here, the Appellant not added new machines but replaced the machines with old machines. The number of installed machines in the month remained the same before and after replacement. The uninstallation and removal of packing machines and installation of equal number of new packing machine did not alter the total number of packing machines used during the month. Rule 6 (4) of PMPM Rules provided that Rule 6(4) The number of operating packing machines during any month shall be equal to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty determination would need to approach the appellate authority instead of reopening the impugned matter by issuing the show cause notice. We find that Tribunal in the matter of M/s Forbos Industries (Supra) and Sulekhram Steel Ltd. (Supra) held that order fixing production capacity based duty is appealable order. In these circumstances also, we find that demand is not sustainable prime facie on this ground also. 6.5 Similarly, in the present matter Revenue cannot demand duty unless the orders of determination of production capacity based duty has been reviewed. In the present case, it is seen that the Appellant after following the proper procedure paid the duty assessed by the Jurisdictional Deputy Commissioner vide Order No. F.No. V/16-10/CTC/08-09/Pt II/228 dated 15.04.2009, Order No. F.No. V/16-10/CTC/08-09/Pt II/1553 dated 16.07.2009 and Order No. F.No. V/16-10/CTC/08-09/Pt II/1183 dated 15.06.2009 and also orders dated 10.09.2008, dated 27.02.2009, dated 22.05.2009 and dated 01.06.2009 fixing annual capacity of production after the replacement of packing machines, however no action was taken by the department to modify these orders by filing review application or appeal. O ..... X X X X Extracts X X X X X X X X Extracts X X X X
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