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 required to pay duty for the entire month first. The Tribunal found that the appellant's method of availing abatement complied with Rule 10 of the Pan Masala Packing Machines Rules, 2008, and was supported by judicial precedents. The demand for recovery of Central Excise duty was deemed unsustainable, and the impugned order was set aside on 25-1-2023.

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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 Abatement
The 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 Motu
The 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.

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