Deeming fiction for packing machines sustained prima facie duty liability; complete pre-deposit waiver was declined, with conditional stay granted.

For stay purposes, the record was held to prima facie establish duty liability under the Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008, because two pouch packing machines were recovered from undeclared premises along with supporting materials, raw materials, and statements indicating use of automatic packing machines for gutkha manufacture. The deeming provision treated goods cleared from premises where a packing machine is installed as manufactured with the aid of such machine, regardless of actual use or working condition. On that basis, complete waiver of pre-deposit was declined, but partial protection was granted conditionally: deposit of Rs. 1 crore within eight weeks, after which the remaining duty and penalty were waived and recovery stayed pending appeal.

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Issues: Whether, for the purpose of stay, the appellants had made out a case for waiver of pre-deposit and complete stay of recovery, and whether the material on record prima facie established liability to duty under the Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008.

Analysis: The record showed recovery of two pouch packing machines from undeclared premises, supporting materials and raw materials, and statements of the supervisor, proprietor, and suppliers indicating use of automatic packing machines for manufacturing gutkha. The relevant rules contained a deeming provision that goods cleared from a factory where a packing machine is installed are treated as manufactured with the aid of such machine, irrespective of actual use or working condition. On that basis, the appellants were found to have a prima facie duty liability for the relevant period, and the balance of convenience was held to be in favour of the Revenue. However, considering the facts and circumstances, partial protection was considered appropriate on conditional terms.

Conclusion: Complete waiver of pre-deposit was declined. The appellants were directed to deposit Rs. 1 crore within eight weeks, and upon such deposit, the remaining duty and penalty were waived and recovery stayed till disposal of the appeal.

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