2023 (9) TMI 1370 - AT - Central Excise

Tribunal allows duty abatement for machine's operational days, citing Rule 10 compliance.

The Tribunal allowed the appeal, ruling that the appellant could pay duty only for the days the machine was operational and avail abatement without being ... Compounded Levy Scheme - Abatement of duty - appellant availed abatement of duty for the days the machine was sealed and not in operation - HELD THAT:- The appellant have followed the procedure for taking abatement of duty provided under Rule 10 of “Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008”. From the plain reading of the Rule 10 it is clear that the abatement is available to the appellant on following the condition laid therein. As per the condition the appellant has to intimate the jurisdictional officer in advance regarding sealing and de-sealing of the machines. In the present case there is no dispute that the intimation was given well in advance and the Jurisdictional Range Superintendent has de-sealed and re-sealed the machine and the machine was operated only during that period - In the present case, the appellant is eligible for abatement in principle and under no circumstances the full duty can be demanded for the period of abatement when the machine was not in operation. This issue has been considered in various judgments. In the case of THE COMMISSIONER VERSUS M/S THAKKAR TOBACCO PRODUCTS P. LTD. [2015 (11) TMI 319 - GUJARAT HIGH COURT] the Hon’ble Gujarat High Court considered the same issue, where it was held that When the rules do not provide for the manner in which duty is required to be abated, nor do they provide that abatement shall be by an order of the Commissioner or any authority, but nonetheless provide for abatement of duty and the extent of entitlement to such abatement, no fault can be found in the approach of the assessee in suo motu taking the benefit of such abatement. In the case of COMMISSIONER OF CENTRAL EXCISE, DELHI-I VERSUS SHAKTI FRAGRANCES PVT. LTD. UNIT-II [2015 (10) TMI 1040 - DELHI HIGH COURT], the Hon’ble Delhi high Court also considered the similar issue where it was held that On a collective reading of Rules 9 and 10 of the PMPM Rules, the Court is of the view that the failure to make the payment of duty on fifth day of every month cannot result in depriving the assessee of the pro rata abatement of duty which he is in any way entitled to since admittedly in the present case there has been a closure of the factory from 14th to 31st August, 2012 and an abatement order has also been passed on 28th August, 2012. However, the assessee would be liable to pay the interest for the period of late deposit of duty. The demand is not sustainable. Accordingly, the impugned order is set aside. Appeal is allowed. Issues Involved:1. Whether the appellant was required to pay duty for the entire month and then claim abatement for the days the machine was not in operation.2. Whether the appellant could pay duty only for the days the machine was in operation and avail abatement suo motu.Detailed Analysis:Issue 1: Payment of Duty for the Entire Month and Claiming AbatementThe appellant, a manufacturer of Pan Masala containing tobacco, operated under the Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008. The appellant paid duty under the compounded levy scheme only for the days the machine was operational, availing abatement for the non-operational days. The Revenue issued a show cause notice for recovery of Central Excise duty amounting to Rs. 56,39,351/- for not paying duty for the entire month. The Adjudicating Authority confirmed the demand with interest and penalty, asserting that the appellant should have paid duty for the entire month and then claimed abatement.Issue 2: Payment of Duty Only for Operational Days and Availing Abatement Suo MotuThe appellant contended that there was no requirement in the rules to first pay duty for the entire month and then claim a refund. The appellant followed the procedure for abatement as per Rule 10 of the Pan Masala Packing Machines Rules, 2008, which allows abatement if the factory did not produce goods for a continuous period of fifteen days or more. The appellant argued that the intimation for sealing and de-sealing the machines was given in advance, and the jurisdictional officer supervised the process, complying with the rules.Judicial Precedents and Tribunal's Findings:1. Commissioner v. Thakkar Tobacco Products Pvt. Ltd. (2016) (Guj.): - The Gujarat High Court held that abatement means reduction or diminution of duty and is not akin to a refund. The court noted that Rule 10 does not stipulate the need to pay the entire duty first and then claim a refund. The appellant's method of paying duty only for operational days and availing abatement was upheld.2. CCE, Delhi-I v. Shakti Fragrances Pvt. Ltd. Unit-II (2015) (Del.): - The Delhi High Court ruled that the failure to pay duty by the fifth day of the month does not disqualify an assessee from claiming pro-rata abatement. The court emphasized that Rule 10 allows abatement if the factory is non-operational for fifteen days or more, and the appellant complied with the intimation requirements.3. CCE, Kanpur v. Trimurti Fragrances Pvt. Ltd. (2019) (All.): - The Allahabad High Court affirmed that the appellant could calculate and set off the abated duty against the duty payable in the next month without first depositing the entire duty. The court highlighted that the statutory provisions and the rules support the appellant's method of availing abatement.Tribunal's Decision:The Tribunal found that the appellant complied with Rule 10 by giving prior intimation for sealing and de-sealing of the machines, and the jurisdictional officer supervised the process. The Tribunal noted that there is no provision in Rule 10 requiring the payment of duty for the entire month before claiming abatement. The Tribunal relied on the judicial precedents which supported the appellant's method of paying duty only for operational days and availing abatement. Consequently, the demand raised by the Adjudicating Authority was deemed unsustainable.Conclusion:The Tribunal set aside the impugned order and allowed the appeal, ruling that the appellant was entitled to avail abatement for the non-operational days without first paying the entire duty for the month. The decision was pronounced in the open court on 25-1-2023.