2022 (5) TMI 1115 - AT - Central Excise

Tribunal allows appeals for redetermination of annual production capacity, stresses timely legal amendments in duty assessments.

M/s. Godfrey Phillips India Ltd. Versus Commissioner of Cen. Excise & ST, Pune-III

The tribunal allowed the appeals, remanding the matter for redetermination of the annual production capacity considering retrospective amendments. The ... Compounded levy scheme - Re-determination of Annual Capacity of Production and monthly duty liability - Pan Masala Packing (Capacity Determination & Collection of Duty) Rules, 2008 read with Notification No 30/2008 of the CE(NT) dated 01.07.2008 and Notification No. 42/2008-CE(NT) dated 01.07.2008 - HELD THAT:- The scheme of the Pan Masala Packing Machines (Capacity Determination And Collection of Duty) Rules, 2008, has been well explained in the impugned order and the during the course of arguments by the appellants. In terms of the said rules the appellant are required to make the declaration in terms of Rule 6 of the said rules, declaring the number of installed packing machines in their factory and the retail sale price of the pouches to be produced by them. On the basis of the declaration made and after causing the verification of the same the Assistant/ Deputy Commissioner passes an order determining the Annual Capacity of production - In terms of Rule 7 and 9, on the basis of the capacity of production so determined the appellant determines and pays the duty every month at the start of month. Subsequently the duty so paid is determined on the actual basis in subsequent month after allowing for any abatement as per Rule 10. Interestingly all the impugned orders are dated 28.10.2011, 24.01.2012, and 13.02.2012, i.e. prior to the amendments made retrospectively in the rule retrospectively with effect from 13th April 2010. Hence these orders need to be reconsidered in terms of the said amendments made by the Finance (No 2) Act, 2014 - Ideally matter needs to be remanded back to the original authority for determination of the Annual Capacity of Production after taking into account the amendments and decisions. Appeal allowed by way of remand. Issues Involved:1. Determination of Annual Capacity of Production.2. Jurisdiction of Assistant Commissioner in determining Monthly Duty Liability.3. Sealed and uninstalled packing machines.4. Retrospective amendments to the Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008.Issue-wise Detailed Analysis:1. Determination of Annual Capacity of Production:The appellant is engaged in the manufacture and clearance of Pan Masala, which falls under Tariff Item 21069020. They filed declarations as required under the Pan Masala Packing (Capacity Determination & Collection of Duty) Rules, 2008. The Assistant/Deputy Commissioner determined the annual capacity of production based on these declarations. The appellant argued that the determination of annual capacity should consider only the operative packing machines and the actual RSP printed on pouches by each machine. They contended that the orders were based on assumptions and presumptions, which are not legally valid. The tribunal noted that the scheme of the Pan Masala Packing Machines (Capacity Determination And Collection of Duty) Rules, 2008 requires the declaration of installed packing machines and the retail sale price of the pouches to be produced. The Assistant/Deputy Commissioner is responsible for determining the annual capacity of production based on these declarations.2. Jurisdiction of Assistant Commissioner in determining Monthly Duty Liability:The appellant argued that under the Pan Masala Rules, the adjudicating authority was only required to determine the annual capacity of production and not the monthly duty liability. They cited the decision in Godfrey Phillips India Ltd. Vs. CCE, which supports their claim. The tribunal acknowledged that the Assistant/Deputy Commissioner determines the annual capacity of production and that the duty payable is calculated monthly based on this capacity. The tribunal emphasized that the determination of duty should be based on actual production and not on assumptions.3. Sealed and uninstalled packing machines:The appellant contended that Machine No. I was sealed by the jurisdictional Superintendent and remained in a sealed condition. They argued that a sealed and uninstalled machine should not be considered an operating packing machine. The tribunal referred to the decisions in Kay Pan Masala (P) Ltd. and Phool Chand Sales Corporation, which held that sealed machines should not be considered operational. The tribunal agreed with these precedents, stating that once a packing machine is sealed in the prescribed manner, it should be treated as uninstalled and should not be included in the determination of annual capacity or duty payable.4. Retrospective amendments to the Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008:The tribunal noted that the relevant rules were amended retrospectively by the Finance (No 2) Act, 2014. These amendments impacted the determination of duty liability. The tribunal observed that the impugned orders were issued before these retrospective amendments and thus needed reconsideration. The tribunal emphasized that the amendments should have been brought to the bench's notice earlier, and the matter should have been remanded for redetermination in light of these amendments. The tribunal concluded that the proceedings for determining the annual capacity of production had become redundant due to the passage of time and the subsequent amendments.Conclusion:The tribunal allowed the appeals and remanded the matter to the original authority for redetermination of the annual capacity of production, taking into account the retrospective amendments made by the Finance (No 2) Act, 2014, and the observations made in the order. The original authority was also directed to finalize and determine the duty by adjudicating all the show cause notices issued to the appellant in a time-bound manner, within three months of receiving the order.