2014 (3) TMI 661 - AT - Central Excise

Tribunal rules in favor of pan masala manufacturers on duty liability dispute

HR. TRADING CO. Versus COMMISSIONER OF CENTRAL EXCISE, LUCKNOW

The Tribunal ruled in favor of the appellants, manufacturers of pan masala, in a case concerning duty liability under the new scheme introduced from ... Duty demand - Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 - appellant found it unviable to operate under the new scheme they filed a declaration with Range Office on 7-7-2008 declaring that they had only one packing machine in their factory and they wanted the department to seal the machine immediately since they do not want to carry on their manufacturing activity - Held that:- situation being dealt with was a stage of transition from the old scheme of paying duty to the new scheme of paying duty. The appellants had complied with the requirements of giving intimations and getting the machine sealed. Machine was sealed at 10 AM on 9-7-2008. In such circumstances no liability more than the duty liability on proportionate basis for the first eight days will arise in view of provisions like Rule 10 and Rule 16 of the said Rules - In the facts of the case no penalty is warranted on the appellants. Appellants are directed to pay proportionate duty liability for 8 days with appropriate interest - Decided partly in favour of assessee. Issues:Manufacturing duty liability under new scheme from 1-7-2008, Compliance with Pan Masala Packing Machines Rules, Liability for duty payment after sealing packing machine on 9-7-2008, Imposition of penalty under Rule 17 of the Rules.Manufacturing Duty Liability under New Scheme from 1-7-2008:The appellants, manufacturers of pan masala containing tobacco, transitioned to a new duty payment scheme introduced through Pan Masala Packing Machines Rules from 1-7-2008. Under the new scheme, duty payment was based on the installed capacity of packing machines in the factory. The appellants had only one packing machine and had been paying duty based on the assessable value of goods cleared until June, 2008.Compliance with Pan Masala Packing Machines Rules:As per Rule 6(1) of the Rules, the appellants were required to intimate the number of packing machines installed in their factory within 10 days from 1-7-2008. The appellants declared to the Range Office that they had one packing machine and requested its sealing on 7-7-2008. The machine was sealed on 9-7-2008, signifying their intent to discontinue manufacturing activity under the new scheme.Liability for Duty Payment after Sealing Packing Machine on 9-7-2008:The Revenue contended that the appellants should have paid duty for July, 2008, as they were manufacturing during the first eight days of the month before sealing the machine. A Show Cause Notice was issued for recovery of duty, interest, and penalties. The Tribunal noted that the machine was sealed on 9-7-2008, and no liability beyond duty for the first eight days should arise as per Rule 10 and Rule 16 of the Rules.Imposition of Penalty under Rule 17 of the Rules:The appellants argued that no penalty should be imposed as they had complied with all requirements, including timely intimations and discontinuation of manufacturing activity. The Tribunal agreed, stating that no penalty was warranted in the circumstances. The appellants were directed to pay proportionate duty liability for eight days with interest, and the rest of the demanded liabilities were set aside.In conclusion, the Tribunal disposed of the stay petition and partially allowed the appeal, emphasizing that the appellants had acted in compliance with the rules during the transition period from the old to the new duty payment scheme.