2022 (12) TMI 1141 - AT - Central Excise

Tribunal allows appeal, finding appellant followed procedures and paid duty, sets aside impugned order.

CHANDAN TOBACCO CO Versus C.C.E. & S.T. -DAMAN

CHANDAN TOBACCO CO Versus C.C.E. & S.T. -DAMAN - TMI Issues Involved:1. Timeliness of the Order2. Determination of Annual Capacity of Production3. Duty Demand on Replacement of Packing Machines4. Duty Demand on Addition of Machines in the Middle of the Month5. Duty Demand on Use of Same Machines for Different Products6. Pro-rata Payment of Duty7. Abatement of Duty for Non-Production PeriodsDetailed Analysis:1. Timeliness of the Order:The appellant argued that the impugned order was passed 12 years after the issuance of the show cause notice, which was not within a reasonable time. They cited several judicial precedents to support their contention that the delay itself should be grounds for setting aside the order.2. Determination of Annual Capacity of Production:The appellant contended that the annual capacity of production is determined by the Deputy Commissioner under Rule 6(3) of the PMPM Rules. This determination, once made, was not challenged by the department and thus became final. The capacity determination orders were passed under Section 3A of the Central Excise Act and were appealable under Section 35 of the same Act. The appellant paid duty based on these orders, and any challenge to these orders should have been made through an appeal, not through a show cause notice.3. Duty Demand on Replacement of Packing Machines:The appellant argued that the duty demand of Rs. 5,25,00,000/- on machines installed as replacements was illegal. They followed the procedure prescribed in Rule 13 of the PMPM Rules for the addition and removal of machines. The number of installed machines remained the same before and after the replacement, hence no additional duty was payable. The Commissioner's demand was not legally correct as the total number of operating machines did not change.4. Duty Demand on Addition of Machines in the Middle of the Month:The appellant contended that the demand of Rs. 98,37,500/- for machines added in the middle of the month was unsustainable. They followed Rule 6(6) and paid the duty on a pro-rata basis as directed by the Deputy Commissioner. The revised capacity determination order did not revise the annual capacity from the beginning of the month, and the duty was paid accordingly.5. Duty Demand on Use of Same Machines for Different Products:The appellant argued that the demand of Rs. 21,75,000/- for using the same machines for Pan Masala and Gutkha in the same month was illegal. They paid duty on a pro-rata basis as per the capacity determination order, which had become final. There was no addition of machines or manufacture of goods with a new MRP, making Rule 8 inapplicable.6. Pro-rata Payment of Duty:The department contended that Rule 8 did not provide for pro-rata payment of duty based on the date of installation of new machines and that duty should be paid for the whole month. However, the tribunal found that Section 3A of the Central Excise Act and the PMPM Rules allowed for pro-rata determination of annual capacity and duty. The appellant followed the procedure, and the declarations were accepted by the proper officer, making the demand for additional duty legally incorrect.7. Abatement of Duty for Non-Production Periods:The appellant was entitled to abatement under Rule 10 of the PMPM Rules for periods when goods were not produced for 15 days or more. The Commissioner denied abatement, but the tribunal found that no duty could be demanded for periods when goods were not produced. This was supported by the judgment in CCE, Jaipur-II v. Jupiter Industries, which held that no duty is leviable for periods when a machine has not been operated.Conclusion:The tribunal set aside the impugned order, finding that the appellant followed the prescribed procedures and paid the duty as determined by the jurisdictional officers. The demands for additional duty were not legally sustainable, and the appeal was allowed with consequential relief.