2015 (8) TMI 34 - AT - Central Excise

Tribunal rules in favor of appellant company, setting aside duty demands for March 2011 and July 2013

The Tribunal ruled in favor of the appellant company, setting aside duty demands for the periods of March 2011 and July 2013. The duty demand of Rs. ... Denial of abatement claim - Closure of factory - Applicability of Rule 9 - manufacturers of retail pouches of Gutkha, pan masala and chewing tobacco. - Held that:- Conditions for claiming abatement under Rule 10 of PMPM Rules are satisfied, that the appellant had applied for rebate and that the rebate is admissible. The appellant, however, instead of paying full duty for the Month of March, 2011 by 5th March, 2011 had paid only the proportionate duty for the period from 17th March, 2011 to 31st March, 2011 on 21st March, 2011 - The duty demand of ₹ 32,25,805/- has been confirmed on this basis which represents the duty for the period from 1st March to 16th March. However, we find that this issue stands settled in favour of the appellant by the judgment of Hon'ble Allahabad High Court in the case of Steel Industries of Hindustan vs. CCE, Ghaziabad reported in [2013 (10) TMI 172 - ALLAHABAD HIGH COURT], wherein in respect of similar provisions regarding levy of duty on compounded basis in respect of iron and steel product, Hon'ble High Court had held that for claiming the abatement for the period of closure of the factory, depositing duty for the whole month is not a pre-condition and that in such cases the duty would be required to be paid only for the number of days for which a factory was working. However, since the due date for payment of duty was 5th of the month and the appellant paid the duty only on 21.03.2011, the appellant in respect of the net duty payable by them, would be liable to pay interest on it as per the provisions of PMPM Rules for the period of delay. - appellant had commenced manufacture of new RSP w.e.f. 24.07.2013 on 4 new machines. The department invoking Rule 8 of the PMPM Rules has taken the stand that since with the installation of 4 new machines on 24.07.2013, the maximum number of operating machines has increased to 25, the duty would be calculated in respect of these machines for the whole month i.e. duty payable for July 13 in respect of pan masala pouches manufactured would be - '13 multiplied by the rate applicable to MRP of ₹ 1 + 4 multiplied by the rate applicable to MRP of ₹ 4'. The stand of the appellant is that the duty payable in respect of the 4 new machines installed w.e.f. 23.04.2013 would be subject to the provisions of the Fourth Proviso to Rule 9 and accordingly, in respect of these four machines, duty would be chargeable only for the 8 days from 24.07.2013 to 31.07.2013. The Fourth proviso to Rule 9 clearly states that in case a manufacturer permanently discontinues the manufacture of goods of existing RSP, his monthly duty liability shall be re-calculated on pro-rata basis of the total number of days in that month and the number of days remaining in that month counting from the date of discontinuation and incase the amount of duty is so recalculated is less than the duty paid for the month the balance shall be refunded to him by 20th of the following month. This proviso also states that in case a manufacturer in a particular month commences manufacturing of the goods of a new RSP, his monthly duty liability shall be recalculated pro-rata on the basis of total number of days in that month and the number of days remaining in that month counting from the date of commencement and duty liability for the month shall be discharged unless the differential duty is paid by him by next 5th of the following month. In respect of four machines, the duty at the rate applicable for the MRP of ₹ 4 would be chargeable only for 8 days from 24th July to 31st July and not for the entire month. The appellant have discharged duty liability on this basis only. Therefore, we hold that the duty demand of ₹ 1,51,35,483/- confirmed against the appellant on the basis that in respect of these 4 machines, the duty would be chargeable for the whole month, is not sustainable and has to be set aside. - However, in respect of March, 2011, the appellant would be liable to pay interest on the net duty payable for this month for the period of delay from the due date as per the provisions of PMPM Rules - Decided partly in favour of assessee. Issues Involved:1. Duty abatement for factory closure in March 2011.2. Duty liability for new packing machines installed in July 2013.Issue-wise Detailed Analysis:1. Duty Abatement for Factory Closure in March 2011:The appellant company, a manufacturer of retail pouches of Gutkha, pan masala, and chewing tobacco, claimed abatement of duty for the period from 01.03.2011 to 16.03.2011 when their factory was closed. According to Rule 10 of the PMPM Rules, they paid duty only for the operational days from 17.03.2011 to 31.03.2011. The department argued that the appellant should have paid the full month's duty by 5th March 2011 and then claimed abatement. The duty demand of Rs. 32,25,805/- was based on this premise.The Tribunal, however, referenced the judgment of the Hon'ble Allahabad High Court in the case of Steel Industries of Hindustan vs. CCE, Ghaziabad, which held that for claiming abatement, paying duty for the entire month is not a pre-condition. The Tribunal also cited its own previous decisions supporting this view. Thus, the duty demand of Rs. 32,25,805/- was deemed unsustainable. However, the appellant was liable to pay interest on the delayed payment of the net duty for March 2011.2. Duty Liability for New Packing Machines Installed in July 2013:In July 2013, the appellant installed four new machines for manufacturing pan masala pouches with an MRP of Rs. 4, effective from 24.07.2013. The department argued that, according to Rule 8 of the PMPM Rules, the duty should be calculated based on the maximum number of machines operated on any day during the month, thus requiring duty for the entire month for these new machines. The appellant contended that the Fourth Proviso to Rule 9 should apply, which allows for pro-rata duty calculation when manufacturing goods of a new MRP commences during the month.The Tribunal agreed with the appellant, stating that the Fourth Proviso to Rule 9 qualifies the method of duty calculation prescribed under Rule 7 read with Rule 8. It emphasized that the proviso should not be rendered redundant, as per the Hon'ble Bombay High Court's judgment in Shree Satpuda Tapi Parisar Sahkari Sakhar Karkhana Ltd. vs. Union of India. Therefore, the duty for the four new machines should be calculated pro-rata for the period from 24.07.2013 to 31.07.2013, not for the entire month. Consequently, the duty demand of Rs. 1,51,35,483/- was set aside.Conclusion:The Tribunal set aside the impugned order confirming the duty demands for March 2011 and July 2013, along with interest and penalties imposed on the appellant and its directors. However, the appellant was required to pay interest on the delayed duty payment for March 2011. The appeals were disposed of accordingly.