2018 (4) TMI 100 - AT - Central Excise

Tribunal Upholds Abatement Order on Excess Duty Appeal

The Tribunal upheld the impugned order and dismissed the Revenue's appeal against the abatement of excess duty paid by the respondent. The Tribunal ... Abatement of excess duty paid by the respondent - manufacture of Pan Masala - closure of Factory - case of Revenue is that the respondent did not intimate in these three days advance for closer of the factory, and thus are not entitled for the abatement - Held that: - The intent of the Statute to give three days advance notice for sealing the machines, it does not mean that the machine shall be sealed only after days. The intent is that the machine should be sealed within three days - it is a fact on record that Departmental Officer themselves has sealed the factory on 31 August, 2011 the date which was holiday on account of '1du' I Fitr', As the departmental officer worked and was necessary as acted on the said day, in that circumstances Department cannot claim that the said day was holiday, therefore, they have not given intimation three days in advance. The Committee of Commissioner has reviewed the impugned order in casual manner and have not acted seriously while proposing to file the appeal before Tribunal. Appeal dismissed - decided against Revenue. ISSUES PRESENTED AND CONSIDERED 1. Whether a manufacturer is entitled to abatement under Rule 10 of the Pan Masala Packing Machine (Capacity Determination and Collection of Duty) Rules, 2008 when intimation of factory closure was not given 'three working days' prior to the commencement date because the commencement date fell on a gazetted holiday (Id ul Fitr). 2. Whether the fact that Departmental officers attended and sealed the packing machines on the purported holiday affects the computation of the 'three working days' requirement and the entitlement to abatement. 3. Proper interpretation of the phrase 'three working days' in Rule 10 - whether the statutory purpose is fulfilled if sealing occurs within the three-day window even if the intimation was not strictly prior to three working days. 4. Legality and propriety of an administrative review by a committee of Commissioners directing filing of an appeal under Section 35B(2) where the order-in-appeal had already granted relief. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Entitlement to abatement where closure intimation did not strictly precede the commencement date by three working days because commencement fell on a gazetted holiday Legal framework: Rule 10 of the Pan Masala Packing Machine Rules, 2008 provides that where production ceases for a continuous period of 15 days or more, duty shall be abated provided the manufacturer files an intimation with the Deputy/Assistant Commissioner with a copy to the Superintendent 'at least seven days prior to the commencement of said period' (as reproduced) and other provisions in the Notification require filing intimation to the divisional head at least three working days prior to discontinuance/sealing. Precedent Treatment: No binding precedent was cited or applied in the decision; the Court relied on statutory language and factual matrix. Interpretation and reasoning: The Tribunal examined the purpose of the advance-intimation requirement - to enable departmental officers to attend and seal the packing machines. The Tribunal observed that the statutory intent is to ensure sealing within the advance-notice period rather than to create an inflexible bar that sealing can occur only after the lapse of three working days. Given that the departmental officer in fact attended and sealed the machines on the date of closure (31-8-2011), which was treated by the Department as a gazetted holiday, the Tribunal held that the Department's own acts (sealing on that date) demonstrate that the day could not effectively be treated as non-working for the purpose of denying intimation compliance. Ratio vs. Obiter: Ratio - where departmental officials perform the sealing on the date of closure, the purpose of the 'three working days' notice (i.e., enabling sealing) is satisfied and failure to strictly give notice three working days prior does not automatically deny abatement. Obiter - observations about the holiday being 'subject to visibility of the moon' and consequent doubts expressed by the taxpayer were discussed to explain conduct but are ancillary. Conclusions: The Tribunal concluded that entitlement to abatement was correctly allowed because (a) the sealing occurred on the alleged holiday, negating the Department's contention that the day was non-working for the relevant purpose, and (b) the statutory purpose of the advance notice (to permit sealing) was fulfilled. The impugned order allowing abatement was therefore upheld. Issue 2 - Effect of departmental officers attending and sealing machines on the holiday on computation of 'three working days' Legal framework: The Rules require prior intimation to enable sealing; the requirement is framed in terms of 'working days' for the divisional filing obligation. Precedent Treatment: No prior authorities were applied; the Tribunal relied on principle of purposive construction. Interpretation and reasoning: The Tribunal reasoned that the Department cannot, after having acted on the day (i.e., carried out sealing), assert that that day was a holiday for the purpose of invalidating the intimation. The factual conduct of departmental officers demonstrates availability of supervision and thus satisfies the functional purpose of the rule. The Tribunal emphasized purposive interpretation: the notice requirement exists to allow the Department to seal; where sealing occurred, the purpose is achieved. Ratio vs. Obiter: Ratio - actual availability and action by departmental officers on the date of closure converts that date, for practical purposes relevant to Rule 10, into a working day insofar as the sealing requirement is concerned, and thus non-compliance with the strict temporal requirement does not defeat abatement. Obiter - comment that the Department's post-facto position is inconsistent and cannot be allowed to prejudice the manufacturer. Conclusions: The Tribunal concluded that because the officers sealed the machines on the alleged holiday, the Department's contention that the requisite three working days' intimation was not given is untenable, and abatement rightly follows. Issue 3 - Proper construction of 'three working days' and the statutory intent behind the advance-notice requirement Legal framework: The specific phrase 'three working days' in the Notification/Rule 10 read with the general abatement provisions; Board circular regarding pre-audit was noted but not determinative. Precedent Treatment: No precedent overruled or followed; the Tribunal applied statutory purposive construction principles. Interpretation and reasoning: The Tribunal interpreted 'three working days' in light of the statutory object: to allow the Department time to effect sealing of packing machines. It held that the phrase must be read purposively - that is, the requirement is to permit the Department to act within that timeframe rather than to place an absolute bar on sealing or abatement if literal counting of working days was not observed. The Tribunal rejected a hyper-technical approach that would nullify the statutory purpose where sealing did occur. Ratio vs. Obiter: Ratio - the temporal requirement is to be read in light of its purpose; compliance is measured by whether the Department could and did perform the sealing function within the intended timeframe, not solely by rigid arithmetic of calendar days. Obiter - remarks criticizing the adjudicating authority for using a literalist approach and noting that the party's conduct was not necessarily deliberate evasion. Conclusions: The Tribunal concluded that the statutory intent was satisfied and that the lower authority correctly granted abatement; strict literal non-compliance with the 'three working days' rule does not automatically preclude relief where the practical purpose of the rule (sealing under supervision) was met. Issue 4 - Validity and propriety of the committee review directing appeal under Section 35B(2) Legal framework: Section 35B(2) permits review by a committee of Commissioners and filing of appeals where orders are considered not legal and proper. Precedent Treatment: No precedent discussed; the Tribunal reviewed exercise of administrative review powers. Interpretation and reasoning: The Tribunal recorded that the Committee's review order lacked clarity (timing of review and signatories were unclear) and that the Committee had acted in a casual manner. The Tribunal observed that had the Committee applied its mind seriously, it would not have directed filing of appeal, and that such conduct results in avoidable wasting of the Tribunal's time. Ratio vs. Obiter: Obiter - the chastisement of the Committee for casual review is not essential to the decision on abatement but is an ancillary finding about administrative propriety. Ratio - insofar as the Committee's review formed the basis of the Revenue's appeal, the Tribunal treated the review as insufficiently reasoned and did not permit it to overturn the correctly reasoned appellate order below. Conclusions: The Tribunal criticized the Committee's review as casual and lacking proper application of mind; it found no legal basis in the review to disturb the appellate order and dismissed the Revenue's appeal.