New retail sale price under pan masala machine rules applies only when a different Rule 5 slab is triggered.

Under the Pan Masala Packing Machines Rules, 2008, the expression "new retail sale price" in the proviso to Rule 8 must be read with the retail sale price slabs in Rule 5. Pouches manufactured at Rs. 0.50 and Rs. 1 on the same packing machine remained within the same slab, so the lower retail sale price did not create a new category attracting higher deemed production or additional duty. The differential duty demand and penalty were therefore unsustainable, and duty could not be enlarged beyond the deemed production fixed for the applicable slab.

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Issues: Whether manufacture of pouches bearing a lower retail sale price of Rs. 0.50/- along with pouches of Rs. 1/- on the same packing machine amounted to a new retail sale price under the proviso to Rule 8 of the Pan Masala Packing Machines [Determination of Capacity and Collection of Duty] Rules, 2008, and whether the differential duty demand and penalty were sustainable.

Analysis: A combined reading of Rules 5, 8 and 9 of the Pan Masala Packing Machines [Determination of Capacity and Collection of Duty] Rules, 2008 showed that the expression "new retail sale price" in the proviso to Rule 8 must be understood with reference to the retail sale price slabs under Rule 5. So long as the machine produced pouches within the same slab, the lower RSP did not create a new category attracting a higher deemed production or additional duty. The Tribunal followed its earlier view that manufacture of pouches at Rs. 0.50/- and Rs. 1/- on the same machine remained within the same slab, and the demand could not be enlarged beyond the deemed production prescribed for that slab.

Conclusion: The lower RSP of Rs. 0.50/- was not a new retail sale price for the purpose of the proviso to Rule 8, and the differential duty demand and penalty were unsustainable.

Ratio Decidendi: Under the compounding scheme for pan masala packing machines, "new retail sale price" in Rule 8 refers only to a retail sale price that takes the machine into a different Rule 5 slab and cannot be used to impose duty beyond the deemed production fixed for the applicable slab.

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