2012 (11) TMI 476 - AT - Central Excise

Tribunal rules in favor of appellants in Pan Masala duty liability case

The Tribunal ruled in favor of the appellants in the case regarding duty liability for manufacturing Pan Masala with two different Retail Sale Prices ... Determination of capacity of production - Appellants were manufacturing Pan Masala containing tobacco known as Gutka with two Retail Sale Prices namely, Rs. 1.00 per pouch and Rs. 0.50 per Pouch - two different RSPs of the goods manufactured by them was falling in the same slab – Held that:- Provisions of the first proviso to Rule 8 applies only when Pan Masala with two RSPs falling under two different slabs are manufactured - Rule 8 talks about a situation when the assessee-commences to manufacture Pan Masala of a new RSP during the month - Rule 8 is very punitive in nature in a situation where the same machine is used for manufacturing Pan Masala of more than one RSP - pre-deposit waived Issues:- Appeal regarding duty liability for manufacturing Pan Masala with two different Retail Sale Prices (RSPs) on the same machine.- Interpretation of Rules 5 and 8 of the Pan Masala Packaging Machines (Capacity Determination and Collection of Duty) Rules, 2008.- Dispute over duty liability for specific periods in 2008.- Application of the first proviso to Rule 8 in determining duty liability for manufacturing Pan Masala with different RSPs.- Whether the provisions of Rule 8 apply when the assessee starts manufacturing Pan Masala of a new RSP during the concerned month.- Whether the provisions of Rule 8 are punitive in nature when the same machine is used for manufacturing Pan Masala of more than one RSP.Analysis:1. The case involves two appeals by the same appellants for different periods in 2008, concerning the duty liability for manufacturing Pan Masala with two different RSPs on the same machine. The dispute revolves around the interpretation of Rules 5 and 8 of the Pan Masala Packaging Machines Rules.2. Rule 5 specifies the quantity deemed to be produced based on the retail sale price, while Rule 8 deals with alterations in the number of operating packing machines. The appellants were paying duty based on the capacity of packing machines installed in their factory, leading to a disagreement on duty liability for the specified periods in 2008.3. The appellants declared the number of packing machines in operation for each month, with the Revenue later claiming that duty should be doubled due to manufacturing Pan Masala with two different RSPs. This led to the confirmation of differential duty based on the first proviso to Rule 8.4. The appellants argued that Rule 8 should apply only when Pan Masala with RSPs falling under different slabs are manufactured, contending that the rule is not triggered when two RSPs fall in the same slab. They also disputed the application of Rule 8 when the assessee does not start manufacturing a new RSP in the concerned month.5. The Revenue contended that Rule 8 applies whenever Pan Masala with two different RSPs is manufactured on one machine, rejecting the appellants' interpretation. The Tribunal acknowledged the validity of both arguments, noting that the first proviso to Rule 8 seems to apply when different RSPs fall under different slabs.6. After considering both sides, the Tribunal found merit in the appellants' arguments. It concluded that the provisions of the first proviso to Rule 8 likely apply when Pan Masala with RSPs from different slabs are manufactured. Since the situation did not involve the commencement of manufacturing a new RSP, the Tribunal waived the pre-deposit of dues for the appeal and ordered a stay on the collection of such dues during the appeal's pendency.