2023 (9) TMI 181 - AT - Central Excise

Tribunal sets aside duty demand & penalties, upholds natural justice principles in machine classification appeal.

Commissioner of Central Excise, Guwahati. Versus M/s Dharampal Satyapal Ltd. And M/s Dharampal Satyapal Ltd. Versus Commissioner of Central Excise, Guwahati

Commissioner of Central Excise, Guwahati. Versus M/s Dharampal Satyapal Ltd. And M/s Dharampal Satyapal Ltd. Versus Commissioner of Central Excise, ... Issues Involved:1. Classification of the two FFS packing machines (PK-91 GMP Model) as 'single track' or 'double track' machines.2. Validity of the demand for duty based on the classification of the machines.3. Adherence to principles of natural justice in modifying the Annual Capacity of production.Summary of Judgment:Issue 1: Classification of MachinesThe primary issue was whether the two FFS packing machines (PK-91 GMP Model) installed by the Appellant were 'single track' or 'double track' machines. The department categorized these machines as 'Double Track Machines' based on a report by Dr. Kore of IIT, Guwahati. However, the Appellant contended that these machines were 'single track' based on reports by IIT Delhi professors, who concluded that the machines were 'single track' after analyzing Dr. Kore's report. The Tribunal agreed with the IIT Delhi report, noting that the machines used a single laminate roll and produced pouches in a single line, thus classifying them as 'single track' machines.Issue 2: Validity of Duty DemandThe demand for duty was based on the classification of the machines as 'double track'. Since the Tribunal concluded that the machines were 'single track', the duty demand based on the 'double track' classification was deemed unsustainable. The Tribunal also referenced a similar issue resolved by the Hon'ble Allahabad High Court, which had accepted the 'single track' classification for the same model of machines.Issue 3: Principles of Natural JusticeThe Appellant argued that the Deputy Commissioner modified the Annual Capacity of production without issuing a notice, thus violating principles of natural justice. The Commissioner (Appeals) had set aside the Deputy Commissioner's order on the grounds of denying the right to a hearing and not issuing a show cause notice. The Tribunal upheld this view, emphasizing that the department cannot change its stand without proper notice and hearing.Conclusion:The Tribunal held that the PK-91 GMP Model packing machines are 'single track' machines. Consequently, the demand for duty and penalties based on the 'double track' classification was set aside. The appeal filed by the Appellant was allowed, and the department's appeal was rejected. The Tribunal upheld the order of the Commissioner (Appeals) and concluded that the demand for the past period was not sustainable due to procedural violations.