2016 (5) TMI 1429 - AT - Central Excise

Tribunal rules in favor of appellant, no duty demand or interest under Chewing Tobacco Rules

The Tribunal allowed the appeals in favor of the appellant, ruling that no duty demand or interest should be levied under the Chewing Tobacco and ... Advance payment obligation under the scheme for packing machines - application of the third proviso to Rule 9 of the Chewing Tobacco and Un-manufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010 - liability for interest on delayed payment of excise duty - operation of packing machines after prior intimation and its effect on duty timingAdvance payment obligation under the scheme for packing machines - application of the third proviso to Rule 9 of the Chewing Tobacco and Un-manufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010 - liability for interest on delayed payment of excise duty - Whether duty and interest could be demanded where the assessee, required by the Rules to pay duty by the 5th of the month, could not operate packing machines during 1st-5th (machines being sealed) but operated them in the last week after intimation and paid duty before month end. - HELD THAT: - The Tribunal examined the scheme under the Rules which contemplates payment by the 5th of the month but recognised that where machines were not in operation during the 1st-5th (being sealed and duly intimated), the assessee could not determine or discharge an advance liability for a future period. Applying the third proviso to Rule 9 together with the other relevant provisions of the Rules, the Tribunal held that such factual situation does not attract a delayed payment warranting levy of interest. The Tribunal followed earlier decisions in Trimurti Fragrance Private Limited vs. CCE, Delhi -II and CCE, Delhi -II vs. Vasundhara Flavours , which applied the same proviso and reached the same conclusion that no duty demand or interest could be made in comparable circumstances. On this basis the appeals were allowed.Demand of duty was not sustained and levy of interest for the period was not warranted; the appeals were allowed following the third proviso to Rule 9 and existing Tribunal precedents.Penalty for delayed payment - operation of packing machines after prior intimation and its effect on duty timing - Whether a penalty imposed in one case for the same facts could be sustained where duty and interest were held not leviable under the Rules in the given factual matrix. - HELD THAT: - Since the Tribunal concluded that neither duty nor interest was leviable where the machine was not operational during the advance payment window and duty was paid upon operation before month end, the imposition of penalty in the related case was not sustained. The finding that the third proviso to Rule 9 precludes treating the payment as delayed in these circumstances renders the penalty unwarranted.Penalty confirmed by the original authority was set aside; appeal allowed.Final Conclusion: Appeals allowed: demands for duty and interest were not sustainable where packing machines were sealed during the advance payment period and put to operation after intimation with duty paid before month end; penalty imposed in one case was also set aside, the Tribunal following the third proviso to Rule 9 and its prior decisions. Issues:1. Duty liability under Chewing Tobacco and Un-manufactured Tobacco Packing Machines Rules, 2010.2. Applicability of Rule 9 and 3rd proviso.3. Imposition of interest and penalty.Analysis:Issue 1:The appeals involved the appellant, engaged in the manufacture of Chewing Tobacco, under the scheme of Chewing Tobacco and Un-manufactured Tobacco Packing Machines Rules, 2010. The period in question ranged from May 2013 to December 2014, with duty calculations and payments made monthly. The appellant operated their pouch packing machine in the last week of each month, paying the duty before the month's end. However, proceedings were initiated to demand duty for the full month, along with interest and a penalty. The Original Authority dropped the duty demand but confirmed interest liability and imposed a penalty in one case.Issue 2:The appellant contended that as per the Rules, duty must be paid by the 5th of every month for the liability of that month, requiring advance discharge of duty. Due to machine sealing with intimation to the Department from the 1st to 5th of each month, no advance duty could be paid. The machines were operated in the last week, and duty was paid promptly before the month's end. The appellant argued that their case fell under the 3rd proviso to Rule 9, as Rule 7 was inapplicable for determining future machine operations. Citing previous Tribunal decisions, the appellant demonstrated that no duty demand or interest should be levied in such situations, as per the 3rd proviso to Rule 9 and related Rules. The Tribunal, following precedent, found merit in the appeals and allowed them.Issue 3:The Tribunal's decision was based on the application of the 3rd proviso to Rule 9 and the interpretation of relevant Rules in conjunction with past decisions. The Tribunal concluded that no delayed payment warranted interest levy in the circumstances presented. Consequently, the appeals were allowed, and the orders were in favor of the appellant, as per the dictated and pronounced decision in the open court.