2013 (10) TMI 1199 - AT - Central Excise

Duty liability based on actual manufacturing activity under Pan Masala Packing Rules

The Appellate Tribunal CESTAT AHMEDABAD held that duty liability under the Pan Masala Packing Machines Rules arises on products actually manufactured in ... Waiver of Pre-deposit - Discharge of Duty Liability on Ghutkha under Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rule, 2008 for actual days of use – Held that:- If a assessee is able to forecast his place of manufacturing of Ghutkha and use few out of the machines which are installed in his factory and does not intend to use other machines or manufacture of Ghutkha, he cannot be directed to pay duty liability on all the machines which are installed and later on claim an abatement – Relying upon Rajat Industries Pvt. Ltd. Vs. CCE, Delhi [2013 (1) TMI 250 - CESTAT, NEW DELHI] - no excise duty can be imposed under PMPM Rules unless there is production or manufactured goods under the Excise law - Prima facie Pre-deposit of the duty liability, interest and penalties waived till the disposal – Stay granted. Issues:1. Duty liability on products manufactured under Pan Masala Packing Machines (PNPM Rules).2. Interpretation of Rule 10 of PNPM Rules regarding abatement of duty.3. Applicability of duty liability on all installed machines even if not in use.4. Prima facie case for waiver of pre-deposit of duty liability, interest, and penalties.Issue 1: Duty liability on products manufactured under Pan Masala Packing Machines (PNPM Rules):The appellant filed a stay petition seeking the waiver of pre-deposit of a substantial amount confirmed by the adjudicating authority for not discharging duty liability on products manufactured under PNPM Rules. The consultant argued that duty was paid based on the rules for machines in operation, while the departmental representative contended that duty must be paid for all installed machines as per the rules. The Tribunal analyzed the situation and held that duty liability arises on products manufactured in the factory premises, emphasizing the need for manufacturing activity during the relevant period. The Tribunal referred to a previous case to support the view that excise duty cannot be imposed under PNPM Rules without actual production or manufacturing of goods under the Excise law. Consequently, the Tribunal found that the appellant had made a prima facie case for the waiver of pre-deposit of duty liability, interest, and penalties.Issue 2: Interpretation of Rule 10 of PNPM Rules regarding abatement of duty:The departmental representative argued that Rule 10 of PNPM Rules mandates abatement of duty on machines until the month, implying that duty should be paid for all installed machines. However, the Tribunal disagreed, stating that if an assessee can predict the manufacturing location and use only a few machines, they should not be compelled to pay duty on all installed machines and then claim abatement later. The Tribunal highlighted the requirement of forecasting the manufacturing activity and discharging duty liability on the machines in operation, rather than all installed machines. This interpretation aligned with the provision of Section 3 A of the Central Excise Act, 1944, indicating the duty liability on goods manufactured in the factory premises.Issue 3: Applicability of duty liability on all installed machines even if not in use:The dispute revolved around whether duty liability should be imposed on all installed machines, regardless of their operational status. The Tribunal clarified that the duty liability arises on products actually manufactured in the factory premises, emphasizing the necessity of manufacturing activity during the relevant period. It was established that if an appellant could foresee and discharge duty on working machines, they should not be faulted for not paying duty on all installed machines that were not utilized for manufacturing activities.Issue 4: Prima facie case for waiver of pre-deposit of duty liability, interest, and penalties:After considering submissions from both sides and reviewing the records, the Tribunal concluded that the appellant had presented a prima facie case for the waiver of pre-deposit of duty liability, interest, and penalties imposed by the adjudicating authority. Citing a previous judgment, the Tribunal granted the application for the waiver of pre-deposit and stayed the recovery of the amounts until the appeal's disposal, acknowledging the appellant's compliance with duty liability on the machines in operation and the absence of manufacturing activity on all installed machines.This comprehensive analysis of the judgment highlights the key issues addressed by the Appellate Tribunal CESTAT AHMEDABAD concerning duty liability under the Pan Masala Packing Machines Rules and the interpretation of relevant provisions.