Pro rata duty under packing-machine levy and limited confiscation under the rules confined duty to actual operation and finished goods.

Duty under the packing-machine based levy must be computed pro rata when a machine is installed and used only for part of a month, because Rule 9 requires assessment from the date of commencement of production for the remaining days of that month. On the facts, the machine operated only for two days in February 2012, so demand for duty for the full month was not sustainable. The governing rules also did not authorise confiscation of raw material, packing material, or the undeclared pouch packing machine; confiscation was confined to finished goods. The matter was therefore limited to fresh quantification of redemption fine on the finished goods alone.

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Issues: (i) Whether duty under the Chewing Tobacco and Un-manufactured Tobacco Packing Machine (Capacity Determination and Collection of Duty) Rules, 2010 could be demanded for the entire month when the machine was installed and used only for a part of the month; (ii) Whether confiscation of raw material, packing material and the undeclared pouch packing machine, with consequential redemption fine, was permissible under the Rules.

Issue (i): Whether duty under the Chewing Tobacco and Un-manufactured Tobacco Packing Machine (Capacity Determination and Collection of Duty) Rules, 2010 could be demanded for the entire month when the machine was installed and used only for a part of the month.

Analysis: The machine was admittedly purchased on 26.02.2012 and installed on 27.02.2012, so it was used only for two days in that month. Rule 9, including its proviso, required duty to be calculated on a pro rata basis for the days remaining in the month from the date of commencement of production. The demand for the whole month was contrary to that scheme, and the issue was covered by the earlier view taken in an identical case.

Conclusion: The demand for duty for the entire month of February 2012 was not sustainable; duty was required to be confined to the period of actual operation.

Issue (ii): Whether confiscation of raw material, packing material and the undeclared pouch packing machine, with consequential redemption fine, was permissible under the Rules.

Analysis: Rule 18 provided for action on contravention, but it did not authorise confiscation of raw material, packing material of notified or non-notified goods, or the undeclared pouch packing machine. Only the finished goods were liable to confiscation under the Rules. The matter therefore required reconsideration only for quantification of redemption fine on the finished goods.

Conclusion: Confiscation of the raw material, packing material and machine was not justified, and the matter was remanded for fresh quantification of redemption fine on the finished goods alone.

Final Conclusion: The appeal succeeded in part on the merits of duty and confiscation, but the matter was sent back only for limited recalculation of redemption fine, so the substantive liability was modified rather than wholly annulled.

Ratio Decidendi: Where the packing machine is operational only for part of a month, duty under the packing-machine based levy must be computed pro rata for the actual period of operation, and confiscation can extend only to what the governing rules expressly permit.

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