TaxTMI 
TaxTMI 
TaxTMI 
2014 (9) TMI 665
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....e aid of packing machines and the retail sale price of the products are declared on the pouches which bear their brand names. The aforesaid products have been notified under Notification No. 29/2008-CX (NT) dated 01/07/2008 and Central Excise duty is levied on these goods in accordance with the provisions of Section 3A of the Central Excise Act, 1944 on the basis of number of packing machines used and the MRP mentioned on the pouches. 2.2 The Assistant Commissioner of Central Excise, Nanded Division determined the monthly liability of the duty payable by the appellant at Rs. 69 lakhs vide order dated 12/10/2010. The duty so determined was payable in terms of Rule 9 of Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 (the Rules for short). 2.3 The appellant-assessee did not pay the monthly duty of Rs. 69 lakhs in November, 2010 and the said duty of Rs. 69 lakhs was adjusted in April, 2011 against the rebate claim sanctioned vide order dated 20/04/2011 passed by the Dy. Commissioner of Central Excise, Nanded Division. As per Rule 9 of the said Rules, if assessee fails to make the payment of duty in any month and continues to operate any machin....
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.... 6(2) of the said Rules and in the present case such duty liability has been fixed at Rs. 69 lakhs for the month of November, 2010 to January, 2011, at Rs. 25 lakhs for February 2011, at Rs. 2.5 crore for the month of March 2011 and Rs. 6.04 crore for the months of June and July 2011. The appellant has discharged the said duty liability for the month of November to March 2011 in April 2011 by way of adjustment of the rebate claim sanctioned to the appellant. Similarly, the duty liability for the month of June 2011 and July 2011 was paid by the appellant in August 2011 along with interest. Once the duty liabilities are determined by the jurisdictional Assistant Commissioner under Rule 6, the said duty liability becomes final and cannot be reviewed without challenging the assessment and reliance is placed on the decision of the apex Court in the case of Commissioner of Central Excise vs. Flock (India) Ltd. 2010 (120) ELT 285 (SC). It is also contended that no differential duty demand can be raised under Section 11A on redetermination of monthly duty liability in terms of 7th proviso to Rule 9 and reliance is placed on the decision of the apex Court in the case of Collector of Central....
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....d to be used or installed in the factory or the department finds that the manufacturer has not declared particulars regarding total number of packing machines intended to be used or installed in the factory. In the present case, the appellant had filed intimations in Form - 2 in terms of the rule stating number of packing machines installed and operated in the factory, the amount of monthly duty liability, particulars of the payment of monthly duty liability, etc. In case, no monthly duty was deposited for any month, the appellant had mentioned the duty paid as 'nil'. Thus, the appellant kept the department informed of the number of packing machines and operated in the factory and the amounts of monthly duty liability paid by them. Under such circumstances, the 7th proviso to Rule 9 would not be applicable. The learned counsel also submits that the words 'find' and 'found' are defined in the various dictionaries as "discover by chance or effort", "become aware of', "get possession by chance". In other words, the finding has to be by chance or efforts. In the present case, inasmuch as the appellant has declared the number of machinery, question of finding....
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.... 3.3 It is further argued that subsequent to the sanctioning of rebate claim, the adjustment of demand will relate back to the date of export. In the present case, the goods were exported in March, 2010, January, 2011 and March, 2011. Though the rebate claim is sanctioned in April, 2011, the appellant could not pay the monthly duty liability for the month of November, 2010 onwards, in view of the pendency of the rebate claim with the department. Since the rebate has been sanctioned it relates back to the date of export and even a limited application of 7th proviso to Rule 9 could not apply. It is also contended that the same issue was considered by the Commissioner for an earlier occasion also and vide order dated 29/11/2010the Commissioner decided the case in favour of the appellant and it has not been challenged or reviewed by the Revenue. Therefore, the view taken in the present order is contrary to the earlier decision. In view of the above, it is pleaded that the impugned demands are not sustainable in law. 4. The learned Commissioner (AR) appearing for the Revenue, on the other hand, strongly rebuts the contentions of the appellant. He submits that the appellant had challen....
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.... on the part of the appellant in thwarting the determined monthly duty liability for the months of November 2010 to April 2011 and, therefore, in terms of the 7th proviso, the duty liability required to be re-determined, taking into account the number of machines found available, if the same were higher than the number of machines on which the duty liability was determined. On a plain reading of the 7th proviso, the liability of the appellant has to be re-determined taking into account the number of packing machines found available, if it is higher than the number of packing machines declared to the department earlier. Since in the present case, the number of packing machines found available in April 2011 was higher than those installed during November, 2010 to March, 2011, when the default in payment of duty arose, the appellant has to discharge the duty liability on the basis of such re-determination based on the number of machines found available in April, 2011. The same ratio would apply for the differential duty liability for the months of June, 2011 as also July, 2011. In view of the above, it is contended that the demands are sustainable in law and, therefore, the impugned o....
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.... basis having regard to such alteration or modification. (3) The duty of excise on notified goods shall be levied, at such rate, on the unit of production or, as the case may be. on such factor relevant to the production, as the Central Government may, by notification in the Official Gazette, specify, and collected in such manner as may be prescribed: Provided that where a factory producing notified goods did not produce the notified goods during any continuous period of fifteen days or more, the duty calculated on a proportionate basis shall be abated in respect of such period if the manufacturer of such goods fulfils such conditions as may be prescribed. (4) The provisions of this section shall not apply to goods produced or manufactured, by a hundred per cent, export-oriented undertaking and brought to any other place in India. Explanation 1. - For the removal of doubts, it is hereby clarified that for the purposes of section 3 of the Customs Tariff Act, 1975, the duty of excise leviable on the notified goods shall be deemed to be the duty of excise leviable on such goods under The First Schedule and....
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.... monthly duty payable for the month of July, 2008 shall be paid on or before 15th day of July, 2008: Provided further that if the manufacturer fails to pay the amount of duty by due date, he shall be liable to pay the outstanding amount along with the interest at the rate specified by the Central Government vide notification under section 11AA of the Act on the outstanding amount, for the period starting with the first day after due date till the date of actual payment of the outstanding amount: Provided also that in case of increase in the number of operating packing machines in the factory during the month on account of addition or installation of packing machines, the differential duty amount, if any, shall be paid by the 5th day of the following month: Provided also that in case a manufacturer permanently discontinues manufacturing of goods of existing retail sale price or commences manufacturing of goods of a new retail sale price during the month, the monthly duty payable shall be recalculated pro-rata on the basis of the total number of days in that month and the number of days remaining in that month counting from ....
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....l number of days in the month and the number of days remaining in that month starting from the date of commencement of the production of such notified goods and shall be paid within five days of such commencement." 5.1.2. From a reading of Section 3A, it becomes obvious that the said section has been formulated, considering the extent of evasion of duty in regard to goods of specified description and with a view to safeguard the interest of Revenue. Clause (a) of sub-section (2) of Section 3A provides for the manner of determination of annual capacity of production and such annual capacity shall be deemed to be the annual production. Thus, the deeming provision applies to the annual capacity of production. In terms of the powers conferred by sub-section (2) and (3) of Section 3A, Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 has been formulated. Under the said rule, the factory relevant to the production is number of packing machines in the factory of manufacturer and the quantity deemed to be produced is based on the number of operating machines and the retail sale price of the goods produced. Since what is deemed is the quantity of produ....
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....goods of highest retail price which shall be payable in respect of the packing machines operated by him. In other words, 6th proviso deals with declaration in respect of retail prices which were found to be incorrect. 5.3 The 7th proviso deals with a situation where the manufacturer does not pay the duty payable by the due date and continues to operate any packing machines. As per the 7th proviso, so long as the non-payment continues, the manufacturer shall be liable to pay the monthly duty based on the number of operating packing machines declared for the month for which the duty was last paid by him or the total number of packing machines found available in his premises at any point of time thereafter, whichever is higher. In other words, 7th proviso deals with a totally different situation than what is envisaged in the 6th proviso. In particular, the 7th proviso deals with default in payment of duty by the manufacturer by the due date and in such a situation, it provides for taking the highest of the number operating packing machines by comparing the number of such machines when the duty was last paid with the total number of packing machines found available at any point of tim....
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....e situations covered by the 7th proviso is the default in payment of duty by the manufacturer and if the default continues, how to compute the duty liability and what will be the number of packing machines which should be taken into consideration for determination of the duty liability during the default period. In the present case, it is not in dispute that the appellant did not pay the duty for the months of November 2010 to March 2011 and the number of machines found available in April 2011 was much higher than those installed and operating in the month for which the duty was last paid. The duty was last paid in October 2010 and the number of machines operating then was 20 machines whereas in April 2011 when the default was made goods by adjustment of the rebate claim to the appellant, the number of machines found available was much higher. Therefore, during the period of default the number of operating machines to be taken into account for deeming the quantity of production and the consequent duty liability would be the number of machines found available in April 2011 which was higher than the number of operating machines when the duty was last paid. Similar is the situation in....
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....tention of the appellant is accepted, the 7th proviso to Rule 9 would be rendered ineffective or odious. Therefore, an interpretation which would render any provision of law odious should not be and cannot be adopted. The 7th proviso to Rule 9 is totally an independent provision providing for the computation of number of packing machines when a manufacturer defaults in payment of duty. The language of the 7th proviso, in our considered view is unambiguous and clear. The 7th proviso provides that, in a case of default in payment of duty, the duty liability will have to re-determined taking into account higher of the number of operating packing machines at the time when the duty was last paid and the number of packing machines found available at any point of time thereafter when the default was made good. Therefore, the higher of the two numbers has to be taken into account for determination of the duty liability and therefore, in the instant case the demands are clearly in accordance with the provisions of the 7th proviso to Rule 9. It may appear that, by taking the higher of the two packing machines the levy becomes harsh. It is a well settled position in law that taxing statute ha....
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....tive from 08/04/2011 would render the impugned demands unsustainable inasmuch as the duty liability was determined by the Assistant Commissioner for the various months in accordance with the declaration given by the appellant for the respective months. The appellant has relied on the Cotspun Ltd. (supra) case in support of this contention. However, we do not accept this argument for the following reasons. 6.1 Rule 6 (3) of the Rules provides for determination of the duty liability, taking into account the number of operating packing machines and also the retail price on the pouches of the goods manufactured. Rule 9 prescribes the manner of payment of duty and interest and also provides for determination of the duty liability in various situations. Therefore, determination of the duty liability has been provided in the Pan Masala packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 itself. When the law provides for determination of the duty liability, the same has to be given full effect to and cannot be rendered ineffective. Section 11A of the Central Excise Act, 1944 provides for recovery of excise duty short-levied or not levied, short-paid or not paid or....
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....ules. Penalty equal to duty is imposed only when there is fraud, collusion, wilfull mis-statement or suppression of facts or contravention of any of the provisions of the Act or the Rules made therein with intent to evade payment of duty. In the present case, it is not in dispute that the appellant had declared the number of machines installed in the factory and the same were verified by the department and, therefore, none of the above elements exist for imposition of equal penalty. Therefore, imposition of penalty equal to the amount of duty demand confirmed is not warranted. In any case, the issue involves interpretation of law. In such a situation, imposition of penalty is not warranted. Accordingly, we set aside the penalty imposed on the appellant in the impugned order. 9. To sum up, we uphold the confirmation of duty demand along with interest liability thereon under the provisions of 7th proviso to Rule 9 of the Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 read with Section 11A and Section 11AB of the Central Excise, 1944. Penalty imposed under Rule 17 of the Rules read with Section 11AC is set aside. 10. The appeal is disposed of....
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....mes, etc. (ix) Retail sale prices of the pouches to be manufactured during the financial year. (x) The plan and details of the part or section of the factory premises intended to be used by him for manufacture of notified goods of different retail sale prices and the number of machines intended to be used by him in each of such part or section, to the Deputy Commissioner of Central Excise as the case may be with a copy to the Superintendent of Central Excise. Further provided that a new manufacturer shall file such declaration at least 7 days prior to the commencement of commercial production of notified goods in his factory. 12.2 Sub-rule (2) of Rule 6 provides that on receipt of the declaration referred to in sub-rule (1), the adjudicating authority shall, after making such inquiry as may be necessary including physical verification, approve the declaration and determine and pass order concerning the annual capacity of production of the factory within 3 working days in accordance with the provisions of these rules. 12.3 Rule 6(3) provides that the annual capacity of production shall be calculated by application of the appropriate quantity....
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.... the unit of production or as the case may be, on such factor of production, as may be notified. 12.8 Further, Rule 7 provides that the duty payable for a particular month shall be calculated by application of the appropriate rate of duty specified in the notification of the Government of India in the Ministry of Finance (Department of Revenue), No.42/ 2008-CE, dated the 01.07.2008 to the number of operating packing machines in the factory during the month. 12.9 Rule 8 provides that in case of addition or installation or removal or uninstallation of a packing machine in the factory during the month, the number of operating packing machine for the month shall be taken as the maximum number of packing machines installed on any day during the month (emphasis supplied). Provided further that in case of non-working of any installed packing machine during the month, for any reason whatsoever, the same shall be deemed to be operating packing machine for the month. 12.10 Rule 13 provides that in case a manufacturer does not intend to further operate a packing machine, he shall intimate the same to the authority, at least three working days in advance, whereupon the same shall be uninsta....
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....h evidence in particular, etc. 12.14 Further Rule 9 has eight provisions (quoted in para 5.1.1 above verbatim):- (i) First proviso relates to monthly duty payable for the month of July, 2008 (first month of the implementation of the Rules) shall be paid on or before 15th day of July, 2008; (ii) Similarly, 8th proviso provides that in case a new manufacturer commences production of notified goods in a particular month, he will be liable to pay pro-rate duty on the basis of the total number of days in the month and the number of days remaining in that month starting from the date of commencement of the production. (emphasis supplied) (iii) The 3rd proviso provides that in case of increase in the number of operating packing machines in the factory during the month on account of addition or installation of packing machines, the differential duty amount, if any, shall be paid by the 5th day of the following month: (iv) Similarly, the 4th proviso provides that in case a manufacturer permanently discontinues manufacturing of goods of existing retail sale price or commences manufacturing of goods of a new ret....
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....cture took place. (vii) The 7th proviso to Rule 9 provides that in case a manufacturer does not pay the duty payable by the due date, and continues to operate any packing machine, then till the time such non-payment continues, he shall be liable to pay the monthly duty based on the number of 'operating packing machines declared' in the month for which duty was last paid by him or the 'total number of packing machines found available in his premises' at any time thereafter, whichever is higher (emphasis supplied) Thus, the conditions precedents for application of 7th proviso are:- (a) Non-payment of duty payable by the due date; and (b) Continues operation of the packing machine, after due date; and (c) Mis-declaration found with respect to the number of operating packing machine(s) declared to the Revenue, i.e. operation of more number of machines than declared. 12.15thus, the second proviso of Rule 9 takes care of simple default by a manufacturer for violation to pay duty by the due date. But, there being no mis-declaration found on his part either as per the 6th o....
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....st, as provided in 2nd proviso to Rule 9 for late payment of duty, which have been deposited already. 14. Thus, the impugned order is fit to be set aside and is accordingly set aside. The appeal is allowed with consequential benefits, if any. DIFFERENCE OF OPINION 15. In view of the difference of opinion between the two Members, the matter is placed before the hon'ble President, CESTAT for reference to a Third Member: Whether the duty demand is sustainable as per the provisions of 7th proviso to Rule 9 of the Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 inasmuch as, the said rule provides for demand of duty on the basis of higher of the number of operating machines installed when the duty was last paid and the number of machines found installed when the default in duty payment was made goods and such higher number of machines should be deemed to have been installed as per the said proviso as held by the learned Member (Technical), relying on the decision of the Hon'ble apex court in the case of Ramnarayan Ltd vs Assistant Commissioner of Sales Tax (AIR 1955 SC 765; Abdul Jabbar Butt vs State of J & K AIR 1957....
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.... defaulting period. The demand was also raised on the ground that the appellant had again defaulted payment of duty on the dates for the month of June 2011 and August 2011 which was paid in July and September 2011. Hence the appellants are liable to pay duty for the month June, July and August, 2011 also @ Rs. 6,36,50,000/- 19. The contention of the appellant is that it is not a case of misdeclaration of number of machines installed. The appellant relied upon the word "found" given in 6th proviso and 7th proviso of Rule 9 of the Rules. The appellant filed declaration regarding total number of packing machines intended to be used in the factory as required under Rule 6 of the Rules and as per the declaration the proper officer vide Order No. 4/11 effective from April 2011 fixed the month duty liability at Rs. 6,36,50,000/0 per month. The appellant admitted that prior to April 2011 there was default in payment of duty and as determined by the proper officer in pursuance of the declarations field from time to time. The contention is that it is not a case of the Revenue that Revenue had found operating packing machines more than the declared number of packing machines in the factory. ....
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....ng the phrase "whichever is higher". In the present case number of packing machines installed has been correctly declared by all times by filing necessary declaration. Appellant has also filed declaration for the month of April 2011 as provided under Rule 6 of the Rules. It cannot be said that Revenue found that the appellants are using higher number of machines than declared. Hence the provisions of proviso 7 of Rule 9 of the Rules are not applicable on the present case. 22. Revenue relied upon the finding of the lower authorities and submitted that as the appellants are in default in making payment of duty as determined by the proper officer during the period in dispute, therefore as per the 7th proviso to Rule 9 of the Rules the appellants are required to pay monthly duty liability based on the declared number of operating packing machines declared in the month for which the duty was last paid by the appellant or the total number of packing machines found available in its premises at any time thereafter whichever is higher. The proper officer fixed the duty liability for the month of April 2011 at Rs. 6,36,50,000/- per month. Hence the appellants are required to pay duty at thi....
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....vided further that if the manufacturer fails to pay the amount of duty by due date, he shall be liable to pay the outstanding amount along with the interest at the rate specified by the Central Government vide notification under Section 11AB of the Act on the outstanding amount, for the period starting with the first day after due date till the date of actual payment of the outstanding amount:" Reading of this proviso provides manner of payment of duty in case of default in payment of duty at the due date. The 6th proviso to Rule 9 provides as under: "Provided also that in case it is found that a manufacturer has manufactured goods of those retail sale prices, which have not been declared by him in accordance with provisions of these rules or has manufactured goods in contravention of his declaration regarding the plan or details of the part or section of the factory premises intended to be used by him for manufacture of notified goods of different retail sale prices and the number of machines intended to be used by him in each of such part or section, the rate of duty applicable to goods of highest retail sale price so manufactured by him shall be payable in ....