AI Drafter 
TaxTMI 
TaxTMI 
2015 (10) TMI 1921
X X X X Extracts X X X X
X X X X Extracts X X X X
....r units are permitted to be closed down by the proper central excise officers upon the requests/applications of the Petitioner Company. Pan Masala is in the nature of excisable goods falling under Heading No.2106 of the First Schedule to the Central Excise Tariff Act, 1985 (hereinafter referred to as "the Act") and accordingly, such goods are chargeable to excise duty. Excise duty was chargeable on Pan Masala on advalorem basis till financial year 2008, however, subsequently, Pan Masala has been notified under section 3A of the Act for levy and collection of excise duty thereon on the basis of capacity of production. By virtue of Notification No.30/2008-CE (NT) dated 01.07.2008, the Central Government has made Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 (hereinafter referred to as "the Pan Masala Rules"), laying down the procedure and related matters for determination of Annual Production Capacity in respect of a factory manufacturing Pan Masala and also matters relating to calculation of duty, abatement from payment of duty, etc. It is the case of the petitioner that it has been complying with the said rules and has been filing declarati....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., and details of such exercise undertaken by the team of the officers were also videographed by the Revenue Officers. The panchnamas were drawn and the maximum speed at which each of the packing machines could be operated were recorded in the panchnamas. The maximum speed of each of the packing machines installed in the petitioner's factory was found to be ranging between 647 and 679, that is, between 301 to 750 pouches per minute as specified in the second slab of the table under rule 5 of the Pan Masala Rules. The team of Central Excise Officers had also asked the petitioner to obtain from the manufacturer/supplier of Pouch Packing Machines the details of maximum packing speed at which the machines could be operated and accordingly, the petitioners requested the manufacturer M/s Uflex Ltd. for such details, and the said manufacturer has confirmed that the maximum packing speed of the machines supplied by them was 700 pouches per minute. The specimen certificates issued by the manufacturer have been produced on the record of the petition. 5. Thereafter, the Assistant/Deputy Commissioner of Central Excise assessed the compounded levy liability of the petitioner Company in accord....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nufactured by the petitioner Company under the second slab without any objection. For the month of June, 2015 also, the declaration in Form-1 submitted by the petitioner Company for excise duty under the second slab was accepted and the petitioner Company was allowed to remove the notified goods from its factory on payment of excise duty in accordance with the second slab under rule 5 of the Pan Masala Rules. The petitioner, thereafter, submitted the requisite declaration in Form-1 for the month of July 2015. Thereafter, the petitioner Company received letters and communications from the third respondent informing the petitioner that the production capacity of Pouch Packing Machines installed and operated at all the factories of the petitioner Company in March 2015, April 2015, May 2015 and June 2015 was fixed in the third slab and consequently, the petitioner Company was also requested to pay differential duty along with interest. By virtue of such communication, the third respondent had also directed the Range Superintendent to recover the differential duty for all the above months under the Compounded Levy Scheme. It appears that simultaneously, the third respondent also allowed....
X X X X Extracts X X X X
X X X X Extracts X X X X
....slab. If the third respondent desires to make any amendment in the approval so granted and the duty payable so calculated, then appropriate enquiry has to be conducted by him, and such enquiry may include physical verification of the machines as well as the maximum packing speed at which such machines could be operated. However, no enquiry or verification has been undertaken by the third respondent for revising the approval of the declarations and also the assessment of the petitioner's production capacity after March 2015. It is also apparent that the revision in the quantum of duty payable and also the production capacity is being ordered only at the instance of the DGCEI authorities. It was argued that the petitioners have not been given any opportunity of hearing before revising the assessment of duty and also the rate of duty payable by the petitioner Company and therefore, there is gross violation of the principles of natural justice in directing the petitioner Company to commence payment of excise duty under the third slab under rule 5 of the Pan Masala Rules. 9.1 The learned counsel further submitted that the special scheme of the Pan Masala Rules lays down for deemed ap....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e located around New Delhi where the office of the fourth respondent is situated, to submit that despite the fact that similar machines are operated by the said parties at Delhi, the fourth respondent has not carried out any enquiry in respect of such manufacturers and instead, has chosen to cause enquiry at Ahmedabad against the petitioner Company alone, and that too, bypassing the local preventive officers and the Ahmedabad Zonal Unit of their own agency. 9.2 Lastly, it was submitted that the assessment rate of duty payable by the petitioner Company and duty paid, has been finalized because the declarations in Form-1, ER-1 return and also declarations in Form-2 submitted by the petitioner Company from March 2015 onwards have been accepted and assessed by the office of the third respondent herein without any objection. Therefore, if it is the case of the respondents that there was any short payment of excise duty during this period, then notice under section 11A of the Act has to be served upon the petitioner and an opportunity of hearing has to be afforded, as contemplated under the said statutory provision before confirming any demand of duty. It was, accordingly, urged that ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....by each machine. It was submitted that, therefore, while physical verification had been carried out, in the absence of the relevant material, the proper Annual Production Capacity could not be determined. Referring to the panchnama dated 18th May, 2015 drawn by the DGCEI authorities at the time when the premises of the petitioner Company came to be visited, it was pointed out that the concerned officers had recorded that they were informed by the operators that the machines were running at a higher speed than the speed of 700, but after restoration of power supply, all of them reflected the maximum packing speed of "700" only. Further, the operators had informed that the speed of "700 PPM" can be increased further by feeding a secondary password which was not known to them and that they had expressed their inability to reveal the secondary password by saying that they did not know the same. It was submitted that since the company officials could not provide secondary password for changing the speed of said Pouch Packing Machines, in order to ascertain the maximum speed of every Pouch Packing Machine, the officers decided to use the information displayed on various motors fitted in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ndustries v. Collectorate of Central Excise (Appeals), Madras, 2000 (115) ELT 314 (Mad.), for the proposition that where intricate technical processes are involved, the petitioner should be directed to seek remedy before the statutory authorities who would be more competent to assess the merits of the rival pleas, no matter that the petition has been pending for nearly ten years. The decision of the Rajasthan High Court in the case of Virendra Lime Company v. Union of India and others, 1985 (22) ELT 690 (Raj.), was cited for the proposition that classification of a product is a mixed question of law and fact, it is proper to go to the Assistant Collector and avail of alternative remedy and appellate procedure if necessary, and that the petitioner is not entitled to invoke writ jurisdiction, which was premature. 11 This court has considered the submissions advanced by the learned counsel for the respective parties and has perused the record of the case as well as the decisions cited by the learned counsel for the respective parties. 12 At the outset, since an objection has been raised to the very maintainability of the present petition on the ground that there being an alterna....
X X X X Extracts X X X X
X X X X Extracts X X X X
....circumstances of the case and the reliefs prayed for in the present petition. 13. For the purpose of better appreciating the controversy in issue, it may be apposite to refer to certain statutory provisions. The Central Government, in exercise of the powers conferred by sub-sections (2) and (3) of section 3A of the Central Excise Act, 1944, has made the rules called the Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008. Rule 4 thereof provides for factors relevant to production and says that the factors relevant to the production of notified goods shall be the number of packing machines in the factory of the manufacturer and the maximum packing speed at which such packing machines can be operated for packing of notified goods of various retail sale prices. Rule 5 of the Pan Masala Rules makes provision for quantity deemed to be produced and provides for three slabs for the number of pouches per operating packing machine per month. The first slab is comprised of packing machines having the capacity of producing upto 400 pouches per minute; the second slab is comprised of packing machines having the capacity of producing 301 to 750 pouches per....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to be examined in the light of the aforesaid statutory background. 15 The record reveals that pursuant to the amendment in the Pan Masala Rules with effect from 1st March, 2015, the petitioners submitted Form-1 as required, with the details as provided under sub-rule (1) of rule 6 thereof. Subsequently, a committee of Central Excise officers, along with Shri D. P. Jani, Government Approved Chartered Engineer, visited the premises of the petitioners on 5th March, 2015 and drew a panchnama. At the time of the visit, physical verification was carried out and the number of pouches produced per minute and the speed of the Pouch Packing Machines was carried out. In the presence of the panchas and the team officers, the speed of each of the machines was found to be in the range falling under the second slab. Subsequent to such visit, the Deputy Commissioner of Central Excise, Division IV, Ahmedabad-II, by a communication dated 26.03.2015, informed the petitioner as regards duty which the petitioner was liable to pay in respect of its Pouch Packing Machines. A perusal of the notification No.4/2008-CE dated 01.07.2008 as amended from time to time, reveals that the said duty rates relate ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion Capacity of the petitioner's Pouch Packing Machines has been placed in the third slab. On a bare perusal of the impugned communications, it is apparent that prior to issuance thereof, no inquiry whatsoever has been carried out by the Deputy Commissioner of Central Excise as envisaged under sub-rule (2) of rule 6 of the Pan Masala Rules and that the impugned communications are based solely upon the instructions of the Additional Director, DGCEI, Delhi. Clearly therefore, the impugned communications are violative of the provisions of sub-rule (2) of rule 6 of the Pan Masala Rules, inasmuch as, the Annual Production Capacity of the petitioner's factory has been determined without following the procedure as provided under those rules. 19 Another notable aspect of the matter is that the petitioner has been directed to pay the differential duty in relation to the months of March to June 2015 in respect of which, Form-1 submitted by the petitioners had already been accepted and the duty had already been paid. 20 At this juncture, reference may be made to the provisions of section 11A of the Central Excise Act, 1944, which provides for "Recovery of duties not levied or not paid ....