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TMI Blog2023 (9) TMI 293X X X X Extracts X X X X X X X X Extracts X X X X ..... s in essence affirmed the Order in Original as well as the view as taken by the appellate authority. The issue arises out of the quantum of duty which the appellant / petitioner was liable to pay in terms of the provisions contained in the Chewing Tobacco and Unmanufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules 2010 [CTUT Rules 2010]. 2. The writ petition in addition seeks a declaration to the effect that Rule 8 of the CTUT Rules 2010 be declared ultra vires to Section 3A of the Act and additionally being violative of Article 14 of the Constitution. Mr. Kohli, learned senior counsel appearing for the appellant / petitioner fairly submitted that the challenge to Rule 8 would assume significance only if the Court were to not accede to the interpretation which is advocated for consideration and acceptance by the appellant / petitioner insofar as the provisions of the CTUT Rules 2010 are concerned. The principal question which arises is the duty liability to be borne by the appellant / petitioner for the months of June 2012, July 2012 and February 2013 when certain new packing machines were added to the production line and were worked for a cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the production of such goods and the quantity that is deemed to be produced by use of a unit of such factor; and (ii) provide for the determination of the annual capacity of production of the factory in which such goods are produced on the basis of such factor by an officer not below the rank of Assistant Commissioner of Central Excise and such annual capacity of production shall be deemed to be the annual production of such goods by such factory: Provided that where a factory producing notified goods is in operation during a part of the year only, the annual production thereof shall be calculated on proportionate basis of the annual capacity of production: Provided further that in a case where the factor relevant to the production is altered or modified at any time during the year, the annual production shall be re-determined on a proportionate basis having regard to such alteration or modification." 5. Undisputedly, chewing tobacco falling under tariff item 2403 99 10 of the Central Excise Tariff Act, 1985 is notified as one of the goods in respect of which the Union Government had formed the requisite opinion that a duty of excise would be levied and collected in acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be deemed to be one individual packing machine for the purposes of calculation of the number of pouches per operating packing machine per month." 8. Rule 6 obliges a manufacturer of notified goods to make various declarations with respect to the number of packing machines that may be installed in a factory. The aforesaid declaration assumes significance since it correlates with Rule 5 and which lays down the principle for assessing the quantity deemed to be produced. Rule 6 reads as follows:- "6. Declaration to be filed by the manufacturer. - (1) A manufacturer of notified goods shall, immediately on coming into force of these rules, and not later than 8th March, 2010, declare in Form 1 annexed to these rules, - (i) the number of single track packing machines available in his factory; (ii) the number of packing machines out of (i), which are installed in his factory; (iii) the number of packing machines out of (i), which he intends to operate in his factory for production of pouches of notified goods with lime tube and without lime tube, respectively, with effect from the 8th day of March, 2010; (iv) the number of multiple track or multiple line packing machine availabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he thinks proper, for effective segregation of the parts or sections of the premises and the machines to be used in: such parts or sections before granting the approval : Provided further that if the manufacturer does not receive the approval in respect of his declaration within the said period of three working days, the approval shall be deemed to have been granted subject to the modifications, if any, which the Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, may communicate later on but not later than thirty days of filing of the declaration. (3) The annual capacity of production shall be calculated by application of the appropriate quantity that is deemed to be produced by use of one operating packing machine as specified in rule 5 to the number of operating packing machines in the factory during the month beginning which the capacity is being determined: Provided that annual capacity of production for the period from the 8th day of March, 2010 to the 31st day of March, 2010 shall be calculated on the pro-rata basis of the total number of days in the month of March, 2010 and the number of days remaining in the mont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n installed machinery is not intended to be operated. The said Rule further stipulates that every addition or deduction of packing machines from the production line would oblige the manufacturer to make identical declarations and for the annual capacity of production being reassessed accordingly. 10. The duty which is liable to be paid by a manufacturer is envisaged to be levied at a rate specified in a notification to be issued by the Union Government and be leviable on the number of operating packing machines in the factory. This is evident from the provisions contained in Rule 7 which reads thus:- "7. Duty payable to be calculated. - 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. 16/2010-Central Excise, dated the 27th February, 2010 to the number of operating packing machines in the factory during the month." 11. The subject of alteration in the number of operating packing machines is dealt with in Rule 8 which is extracted hereinbelow:- "8. Alteration in number of operating packing machines. - In case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the total number of days in that month and the number of days remaining in that month starting from the date of such discontinuation or commencement and the duty liability for the month shall not be deemed to have been discharged unless the differential duty is paid by the 5th day of the following month and in case the amount of duty so recalculated is less than the duty paid for the month, the balance shall be refunded to the manufacturer by the 20th day of the following month: Provided also that if there is revision in the rate of duty leviable under section 3A of the Act, the monthly duty payable shall be recalculated on the 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 such revision and the duty liability for the month shall not be discharged unless the differential duty is paid by the 5th day of the following month and in case the amount of duty so recalculated is less than the duty paid for the month, the balance shall be refunded to the manufacturer by the 20th day of the following month: Provided also that in case it is found that a manufacturer has manufactured goods of those retail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period under the physical supervision of Superintendent of Central Excise, in the manner that the packing machines so sealed cannot be operated during the said period : Provided that during such period, no manufacturing activity, whatsoever, in respect of notified goods shall be undertaken and no removal of notified goods shall be effected by the manufacturer except that notified goods already produced before the commencement of said period may be removed within first two days of the said period: Provided further that when the manufacturer intends to restart his production of notified goods, he shall inform to the Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, of the date from which he would restart production, whereupon the seal fixed on packing machines would be opened under the physical supervision of Superintendent of Central Excise." 14. It appears from the disclosures made by the appellant / petitioner with respect to additional packing machines that these machines were received on 28 June 2012, 30 July 2012 and 26 February 2013 and sealed on the said dates. It is stated to have thereafter communicated to the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arly be arbitrary. Mr. Kohli submitted that the appellant / petitioner has assailed the validity of Rule 8 as a matter of abundant caution and solely in response to the stand as struck by the respondents in these matters. 17. Mr. Ajit Kalia, learned Standing Counsel and Mr. Abhinav Kalia, learned counsels appearing for the respondents on the other hand submitted that Rule 8 in unequivocal terms prescribes that the moment a packing machine is added to the production facility during the month, the number of operating packing machines would have to be calculated accordingly and be recognized as representing the maximum number of packing machines installed for the month. The Tribunal while upholding the view taken by the original authority as well as the appellate forum has essentially found that the challenge laid to the demand as raised by the respondents would not sustain bearing in mind the plain language of Rule 8. It has accordingly come to conclude that Rule 8 mandates that if any new machine is installed on any date during the month, it is to be considered as having operated for the entire month. It accordingly held that while the number of machines which would be deemed to ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed / installed or removed or uninstalled in a factory during a month. While dealing with such a contingency, however, it stipulates that the number of operating packing machines in a month shall be taken to be maximum number of packing machines which were installed on any day during the month. It becomes significant to note that Rule 8 speaks of both operating packing machines as well as packing machines installed. The said Rule too incorporates a deeming fiction as would be evident from the usage of the phrase "shall be taken as". As we read Rule 8, it is manifest that in case a machine is added to the production capabilities existing in a factory, the number of operating packing machines of the month shall be deemed to be the maximum number of packing machines installed and existing on any day during that month. The fact that a particular packing machine is operated only for a few days during the month does not result in the duty liability being proportionately reduced or enhanced. 23. This is further evident from the Second Proviso to Rule 8 which stipulates that in case an installed packing machine falls into a state of disuse for any reason whatsoever, notwithstanding the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all be paid by the 5th day of the following month: 9. It can be seen from the above reproduced proviso, it enshrines the discharge of duty liability on account of addition and installation of packing machines. The differential duty amount, if any, should be paid by the 5th of the following month. From plain reading of above said proviso, it transpires that the demand of the duty on the products "Pan Masala" can be done so only from the date of production only, if any new machinery installation is done, which in the case is from 10th June, 2013. Since there is no dispute as to the fact that the third packing machine was installed on 10th June, 2013, any demands of the duty liability on an assumed production from the period 1st to 10th June 2013 does not arise, and Ld. Counsel was correct in pointing out that provisions of Section 3A (ii) 2nd proviso thereto of the Central Excise 1944, clearly enshrines that the duty liability has to be discharged on the production of the goods on proportionate basis when there is alteration or modification. The facts being not in dispute that the new machine was installed on 10th June, 2013, the demand for the differential duty from the period fro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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