2018 (12) TMI 1359 - AT - Central Excise

Tribunal rules on duty liability for panmasala pouches, clarifies application of Rule 8

The Tribunal ruled in favor of the appellant, holding that the duty liability for manufacturing panmasala pouches of different retail sale prices on the ... Valuation - manufacture of Gutkha pouches - Department was of the view that since, on the same machine, in addition to the Panmasala pouches of RSP of ₹ 3, the pouches of the RSP of ₹ 2 were also manufactured, first proviso to Rule 8 of the PMPM Rules would become applicable - Held that:- The undisputed facts are that during each of the four months - August 2009, September, 2009, October, 2009 and November, 2009, the appellant in Form -I declaration for that month filed by them in terms of Rule 6 of the PMPM Rules, had clearly declared that they would be using one packing machine for manufacture of the retail pouches of panmasala and that machine would be used for manufacture of the retail pouches of ₹ 2 as well as ₹ 3 RSP. The first proviso to Rule 8 becomes applicable when on an existing packing machine, the manufacturer commences manufacture of the “goods of a new RSP” during that month and in such a situation, this has to be treated as an addition in the number of operating packing machines for the month or in other words, that machine would have to be treated as two machines. The dispute is as to what is a 'new retail sale price'. The new retail sale price would mean the retail sale price which had not been declared in respect of that machine in the Form-I declaration. Identical issue decided in the case of M/S. KAY PAN SUNGANDH (P) LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE, RAIPUR [2017 (4) TMI 982 - CESTAT NEW DELHI], where it was held that Rule provides that if the manufacturer commences manufacturing of the goods of a new retail sale price during the month on an existing machine, it shall be deemed to be an addition in the number of operating packing machine for the month. Appeal allowed - decided in favor of appellant. Issues involved:Interpretation of Rule 8 of Panmasala Packing Machine Rules, 2008 regarding the declaration and duty liability for manufacturing panmasala pouches of different retail sale prices on the same machine.Analysis:The case involved a dispute regarding the duty liability of a manufacturer of Gutkha and panmasala pouches of different retail sale prices for the months of August, September, October, and November 2009. The appellant declared the use of one packing machine for manufacturing panmasala pouches of retail sale prices (RSP) of Rs. 2 and Rs. 3 in each of these months. The Department contended that since the machine was used for both RSPs, it should be treated as two machines, leading to additional duty liability. The Commissioner confirmed a duty demand of Rs. 72.00 Lakhs against the appellant, along with interest and penalty.The appellant argued that the first proviso to Rule 8 of the Panmasala Packing Machine Rules applies only when a manufacturer starts manufacturing goods of a new RSP during a month on an existing machine. They maintained that since they had declared the manufacture of both RSPs in advance, the first proviso should not be applicable. The Department, however, insisted on the additional duty liability due to the use of the machine for multiple RSPs.Upon analysis, the Tribunal found that the first proviso to Rule 8 applies when a manufacturer commences manufacturing goods of a 'new retail sale price' during a month on an existing machine. The term 'new retail sale price' refers to prices not declared in the initial Form-I declaration. As the appellant had declared the use of the machine for both RSPs in advance, the first proviso did not apply. The Tribunal cited a previous decision in a similar case where the issue was settled in favor of the assessee, emphasizing that duty liability should be based on the highest RSP when multiple RSPs are manufactured on the same machine in a month.Given the settled issue and the precedent, the Tribunal set aside the impugned orders and allowed the appeals in favor of the appellants, providing consequential relief.In conclusion, the Tribunal clarified the interpretation of Rule 8 and upheld that duty liability should be based on the highest retail sale price when multiple prices are manufactured on the same machine in a month. The decision was in line with previous rulings and established principles of statutory interpretation.