TaxTMI 
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2022 (9) TMI 214
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.... First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) (for brevity 'the Tariff Act'). The dispute relates to levy of Central Excise Duty on Compounded basis, under section 3A of Central Excise Act 1944, on certain'Packing Machines' used for manufacture of chewing tobacco. The appellants were using these machines in their Unit which according to them do not qualify as 'Packing Machines' in terms of the notification No.10/2010-CE (N.T.) dated 27.02.2010, whereas the revenue in the impugned order held that the said machines are 'Packing Machines'. 2.1 The Central Excise duty is normally levied on the goods manufactured. The actual quantity of goods is measured and duty is charged on actual manufacture of goods under Section 3 of the Central Excise Act. The Central Government is empowered by virtue of Section 3A of the Central Excise Act 1944 (CEA) to levy duty on the 'Deemed Production' where ever it considers it necessary in the interest of revenue. The said section 3A empowers the Government to notify the goods on which the Central Excise Levy will made on the basis of Deemed Production. The product manufactured by the appellants was notified underSection 3A of the Cen....
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....002. SCN also proposed confiscation of three machines and the goods seized valued at Rs.2.31 Cr.Besides, penalty under Rule 26 of the Rules read with Rule 19 of the Capacity Determination Rules, was also proposed on Sh. Manoj Gupta, Director, Sh. Sharad Chaudhary, Director, Sh.Vipin Kumar Aggarwal, Director, Sh. S.K. Aggarwal, Director, Shri ShriGopal Gupta, Chairman of Copal Corporation Ltd. and Gopal Group of Companies, Sh. Yogesh Arora, General Manager (Purchase) and Sh. P.V. Subramaniam, Manager (Purchase). 3. Learned Counsel for the appellant submitted that there are 2 main issues to be decided by Tribunal: (i) Whether the 3 machines under reference qualify to be "packing machine" as envisaged under the Chewing Tobacco and Unmanufactured Tobacco packing Machines (Capacity Determination and Collection of Duty) Rules, 2010? (ii) Whether there was any suppression of facts on the part of the Appellant to evade duty so as to invoke extended period of limitation? 3.1 Learned Counsel argued that the appellants are engaged in manufacture of Flavored Chewing Tobacco falling under Chapter 24 of the First Schedule to the Central Excise Tariff Act, 1985. The products are clear....
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....t be collectively satisfied for the product to qualify as a "specified goods" for the Compound Levy Scheme to be applicable. Learned Counsel pointed out that the product of the Appellant is "Flavored Chewing Tobacco"and packed in pouches. 3.3 Learned Counsel pointed out that the Notification explain the meaning of 'Packing Machines' as under: "Packing Machine" includes all types of Form, Fill and Seal (FFS) machines and Profile Pouch Making Machine, by whatever names called, whether vertical or horizontal, with or without collar, single-track or multi-track and any other type of packing machine used for packing of pouches of notified goods" Learned Counsel pointed out that the packing machines contemplated, for the purposes of such levy under section 3A, are: (a) Form, Fill and Seal machines; AND (b) Profile Pouch making machines; by whatever name they are called and in whatever form they may be - whether vertical or horizontal or any other type - used for the packing of the pouches. Learned Counsel argued that for a machine to qualify as 'Packing Machine' the entire process of packing - i.e., from forming the pouch to its filling and then sealing - has to be performed in ....
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....arned Counsel argued that "Packing" or "packed" in common parlance would mean something which is presented in a manner where it is ready for delivery to its target audience. With respect to the product in question, it would mean being secured in a manner such as would preserve the product in its present form during transportation, storage, distribution and finally sale to its consumer. In effect, a containment that would preserve or enhance the shelf life of the product. Ld Counsel argued that a pouch will be a "packed pouch", if, and only if, it is sealed and secured from all sides. A pouch, filled with the product, but not sealed and having an open end will not qualify to be a "packed pouch". Sealing, so as to secure and protect the product from spilling, contaminating, preserving its quantity and quality, is an intrinsic part of the process of packing. He argued that merely filling the pouch with the aid of a machine will not suffice. Ld Counsel pointed out that the entire packing process indicated above would amply demonstrate that the sole purpose of all the three Impugned Machines is only, and only, filing of the product in the pouches. None of the three Impugned Machines sea....
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....d onto the 3rd worker for sealing. This pouch is manually placed by the 3rd worker between the band sealer on the side of the filling unit (which is run on electricity) to seal the pouch. The band/heat sealer had been welded on the same machine by the Appellant for the convenience and efficiency of the workers only. On the said band sealer, the worker guides the open end of the pouch between the band sealer to seal the same, as an independent and separate process manually. The band/heat sealer can be used for sealing the pouches even without using the filler machine. Learned Counsel pointed out that the above- described process, stands verified and validated by: (a) visits by the Department Officers; (b) the YMCA Report (c) the IIT Delhi Report and (d) the Technical Report submitted by the Appellants before the Department Learned Counsel pointed out that this is the broad description provided in the Show Cause Notice too. 3.9 Learned Counsel argued that the activity of filling of pre-formed pouches, its weighment and sealing are mutually exclusive and independent. Both the processes of filling and sealing on this machine are independent of each other and happen as two se....
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.... filed. The said Declaration inter alia requires the manufacturer to declare 'the name of the manufacturer of each of the packing machine, its identification number, date of its purchase and the maximum packing speed at which they can be operated for packing of pouches of notified goods, with lime tube and without lime tube, of various retail sale prices'. The Form 1,interalia, requires declaration of maximum speed of packing pouches at which it can be operated, again which can only be in case of fully automated FFS machine and not in case of machines which are run by human intervention. Learned Counsel argued that the machines under reference cannot run without human intervention and the output of the same depends on the efficiency of the individual worker. The rules also fix the number of pouches of respective Retail Sale Price, deemed to have been packed during the month on the packing machines covered under the Compound Levy Scheme, which can only be packed using FFS machines, which works with no human intervention. This deemed production mentioned in notification is impossible to be achieved on machines which work with human intervention, where the output is dependent on the e....
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....id notification 'Filter Khaini means chewing tobacco which is packed in sachets of filter paper or fabric before being packed in pouches with the aid of packing machines'. The contention of the revenue is that the aid of packing machines should be for sachet and not for pouch. We are not able to appreciate such interpretation of the explanation. A plain reading of the explanation shows that packing in pouches should be with the aid of packing machines. In this contention, we also refer to clarification issued by the board vide letter dated 53/2010. It was categorically clarified that packing of pouches of notified goods and further filling with the help of manual process will not attract the Chewing Tobacco Rules and duty will be leviable in terms of Section 3 only." (ii) The Hon'ble CESTAT in case of COMMISSIONER OF CENTRAL EXCISE, CHANDIGARH Vs. M/s TEJ RAM DHARAM PAUL reported at 2013-TIOL-1192- CESTAT-DEL (2013(297)ELT 0125 (Tri.- Del.)) has categorically held in Para 14 as under- "14. After taking into consideration the entire facts he has held that in terms of Explanation 5 and the clarification given by the Board he came to conclusion that Section 3A covers only p....
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....machine." Even in the said letters the Appellant described the machines as manual machines. These machines were procured by the Appellant even before the Compound Levy Scheme was conceptualized. 3.15 Learned Counsel argued that the Adjudicating Authority, while rejecting the plea of the Appellant on invocation of extended period, has not referred to the various visits by the Official of the Department for physical verification of the impugned machines, more specifically the visit by the Preventive wing of the Department dated 21.05.2010 and also the various correspondence exchanged giving the nature and working of the impugned machines, more specifically the letter dated 25.05.2010 written by the Appellant, which was already there on record. The letter dated 2nd March, 2010 and filing of declaration dated 5th March, 2010 along with the covering letter, duly acknowledged by the department clearly shows that 2 of the machines under reference were duly informed by the Appellant. The letter dated 5th March categorically says that these 2 machines are not covered under Compound Levy Scheme (CLS) and also the fact that the Appellant will be using these machines, being out of the purvie....
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....the Show Cause Notice is about the change of the nomenclature of one machine from "Sealer (Pedal Operated)" to "Pedal Operated Filler". This was also duly explained during investigation as is given at wherein the statement of the Purchase Manager Mr. P.V.Subramanian is given. In response to Question 1 therein, he has categorically stated that as the description on the bill was wrongly given as "Sealer (Pedal Operated)" instead of "Pedal Operated Filler", it was duly corrected. In fact, it was to done to make the description of the machines more clear and better, from a mere Sealer to Filler. It is also undisputed fact that the Appellant duly filed the requisite statutory declarations, forms, return on or before the due date and duly maintained the statutory records and kept the Department informed of all the facts. The Appellant was not required to give any declaration in the aforesaid Form-I as the Appellant from the Day 1 is of the view that the said machines are manually operated machines and the said Declaration was required to be filed only in respect of FFS machines. 3.17 Learned Counsel argued that the fact that there is no fraud, collusion, wilful misstatement of facts or ....
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....e any penalty can be imposed. In the instant case there is no mensrea. 4 Learned Counsel for revenue took us through the various provisions of law and the notifications issued. 4.1 Learned Counsel for revenue pointed out that after issuance of notification No.10/2010-CE (N.T.) dated 27.2.2010, the appellants vide letter dated 02.03.2010, submitted a list of 16 Form Fill and Seal (for brevity 'FFS') machines for pouch packing. In addition to 16 machines, the appellant declared that there are some machines are TOTALLY MANUAL MACHINES to be used in case of emergency. It was further submitted by the appellant that they would not be undertaking any manufacturing activity of the notified goods w.e.f. 08.03.2010 but would be packing pouches MANUALLY with machines which are manual operated and do not fall within the ambit of the Rules.Learned Counsel for revenue pointed out that the appellant had submitted declaration under Form-1 as required under Rule 6 of the rules only qua 16 FFS machines vide letter dated 5.3.2010. No declaration in form 1 was filed/submitted qua other machines for the reason that the same, being manually operated, did not qualify as "packing machine". Vid....
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....the appellants without actually seeing or receiving the machines in their premises. He relied on the Statement of Sh. ManharBhalla, Sales Manager Cum Factory Manager of M/s Akash Pack Tech (P) Ltd, Faridabad, Statement of Sh. Pradeep Mendiratta, authorized Signatory and Sh. Harish ChanderMendiratta, Proprietor of M/s Prabhat Steels, Patparganj, New Delhion andStatement of Sh. Vishnu Aggarwal, Partner of M/s Tirupati Enterprises 4.5 It further revealed that in respect of one of the three machines claimed to be manually operated machine, the employees (Sh. Subramaniam) who contacted the purported suppliers, had asked the supplier (M/s Industrial Tapes & Packers, New Delhi) to change the description of the machine from 'Dosing Filling Machine" whereas the sale invoice in showed the description as "Sealer (Paddle Operated)" and subsequently on the request of the appellants, the description was further changed to "Pedal Operated filler". A parallel invoice was issued while changing the description of the machine.Similarly, another machine which was also claimed to be manual was also routed through M/s Aggarwal Industrial Packers (P) Ltd who had in turn shown to have been purchased it f....
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....t Commission, ordered the case to be sent back to the adjudicating authority for disposal of SCN in accordance with the provisions of law.Learned Counsel for revenue argued that this machine has been admitted to duty under the Compounded Levy by the appellant before the Settlement Commission. Though the order of settlement commission is not a binding precedent once the matter was referred to the adjudication authority, however, the admission by the appellant cannot be ignored as the same shows willful misstatement by the appellant till the detection by the department on 24.7.2010. 4.8 Learned Counsel for revenue argued that the following questions are raised in this dispute:- 1) Whether three machines found to the operational at the time of visit at the factory premises of the appellant on 24.7.2010 are Packing Machines as per the notification dated 27.2.2010? 2) Whether the appellants had supressed/ mis declared /wilfully misstated and contravened the provision of rules in use of Packing Machines for manufacturing of Chewing Tobacco? 3) Whether the extended period of limitation is invocable in the facts and circumstances of the present case? 4.9 Learned Counsel for revenue....
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....hine. Even while clarifying the exclusion of hand operated fillers/spoons or a similar manually operated device the use of sealer has been excluded meaning thereby that the process of sealing is not linked to the definition of packing but is one of the process for packing of Chewing tobacco in pouches. 4.13 Learned Counsel for revenue pointed out that the filling of pouches with the help of the said machines which are pneumatically/compressor controller and run with the aid of electricity has not been disputed by the appellant. The fact that the pouches filled by the aid of packing machines are sealed by different workers does not come to the rescue of the appellants in view of the definition of packing machine i.e. to say that sealing, whether integrated or separate, won't alter the definition of packing machine which is used to aid the packing process.Ld Counsel for revenue argued that the inference drawn by the appellants that mere filling by a machine without sealing cannot be said to be resulting in packed pouch, is a mis- interpretation of the unambiguous definition and the same amounts to adding words which are not there in the notification. It is well settled that the noti....
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....and ii. Includes any other type of packing machine used for packing of pouches. Thus, the contention of the appellants that their machine does not fall under the first part of the definition of Packing Machine even if correct would not alter the position that the said machines get covered within the definition by virtue of word 'any other type of packing machine used for packing of pouches'. According to the Ld counsel the decisions relied upon by the appellants in the case of CCE Vs Maharashtra Fur Fabrics Ltd.-2002(145) ELT 287 (SC) and Commercial Tax Officer Vs M.R.F Ltd -2009(235) ELT 802 (Raj) are of no use to them. 4.16 Learned Counsel for revenue contested the appellants argument that even if it is presumed that 'any other type of packing machine used for packing of notified goods' does not necessarily mean 'Form, Fill and Seal' machine' still the phrase would include only those machines which perform at least two functions (i) Filling (ii) sealing. Learned Counsel for revenue argued that from the reading of the Notification and the clarification given by the Boardit is lucid that the process of sealing has never been embedded in the definition of packing machi....
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....; --." 4.18 Learned Counsel for revenue argued that for the purposes of charging of duty of the Notified Goods in terms of the provisions contained in Section 3A of the Act, only requisites were: i. The number of machines installed; ii. The retails sale price of the notified goods." 4.19 Learned Counsel for revenue argued that reliance by the petitioner to the Union Budget of 2015 and 2016, to contend that the Rules were amended to incorporate slabs with machines with various speeds is of no relevance in the present case. 4.20 Learned Counsel for revenue pointed out that the appellants contention that the technical reports had been obtain at their back is also devoid of any merits in the light of the fact that the entire proceedings had been drawn in the Panchnamas drawn on the respective dates and in the presence of Incharge /Production Incharge of the Appellants. Ld Counsel for revenue pointed out that both the technical opinions taken by the department were from Government/establish Institutes of Engineering and Technology. Ld Counsel for revenue argued that that the findings of the technical experts has not been assailed by the appellants at any s....
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....long with Assistant Professor from the Department of Mechanical Engineering of the Indian Institute of Technology. For the said reasons, the adjudicating authority has rightly referred to the above visits by the officers of the department, which was in relation to the 3 machines in question. 4.23 Learned Counsel for revenue discussed various letters written by the appellants on various dates.Learned counsel for revenue argued that in terms of the Capacity Determination Rules, the appellants were required to provide the requisite declaration in Form-1 only and the said rules did not provide for declaration in any other form/format. Learned counsel for revenue argued that the appellants failed to declare all the packing machines in Form-1 and had therefore suppressed the material facts from the department, in order to evade payment of appropriate duty of excise. In fact the installation of the third machine was not even intimated to the department in any form. 4.24 Learned counsel for revenue argued that the department initiated investigations to ascertain the correctness of the declaration filed by the appellants. During the investigations the following was revealed: i. Th....
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....with the intention to evade payment of duty under Section 3A of the Act. 4.26 Learned counsel for revenue argued that during in the investigations it was found that the description of the machines claimed to be manual had been changed by the appellants besides fabricating one machine at their own end.Learned counsel for revenue pointed out that the invoice submitted by the appellants during the present proceedings bearing S.No. 252 dated 18.06.1995 addressed to Hari Chand Shri Gopal, Baddi gives the description of the second machine as "Pneumatic filling and sealing machine complete with four heads and DC Motor / Panel". 4.27 Learned counsel for revenue argued that the appellants had committed fraud with clear intention to evade payment of duty under Compounded levy scheme and fraud vitiates everything. Reliance was placed on the following judgments: i. Shahid Ali VsPr.Commr Customs - Final Order No. 51539- 51546/2021 dated 02.06.2021 by CESTAT Delhi. ii. S.P.Chengalvarya Naidu vsJagannath 1994 AIR 3 1994 SCC(1) 4.28 Learned counsel for revenue argued that the benefit of any ambiguity in the exemption notification cannot be claimed by the assesee and the same m....
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.... the provisions for invoking the extended period of limitation are pari-materia to the provisions for imposition of penalty under Section 11AC of the Act. Hence, penalty equivalent to the duty evaded, has rightly been imposed by the adjudicating authority on the appellant unit under Section 11AC of the Act read with Rule 18 of the Capacity Determination Rules. 4.31 Learned counsel for revenue argued that the investigations have revealed that it is not a case of interpretation of the Notification, but the appellant unit in connivance with the Directors/employees had resorted to fraud, wilful mis-representation and contravention of the provisions of the Act and Capacity Determination Rules, with the intention to evade payment of duty. 5. We have gone through the rival arguments and the submissions made by both sides after the hearing. The facts of the case are that the appellants were engaged in the manufacture and packing of chewing tobacco in pouches and tins falling within tariff item 2403 99 10 of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986). The dispute relates to levy of Central Excise Duty on Compounded basis, under section 3A of Central Excise....
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....k of Assistant Commissioner of Central Excise and such annual capacity shall be deemed to be the annual production of such goods by such factory; or (b) (i) specify the factor relevant to the production of such goods and the quantity that is deemed to be produced by use of a unit of such factor; and (ii) provide for the determination of the annual capacity of production of the factory in which such goods are produced on the basis of such factor by an officer not below the rank of Assistant Commissionerof Central Excise and such annual capacity of production shall be deemed to be the annual production of such goods by such factory : Provided that where a factory producing notified goods is in operation during a part of the year only, the annual production thereof shall be calculated on proportionate basis of the annual capacity of production : Provided further that in a case where the factor relevant to the production is altered or modified at any time during the year, the annual production shall be re-determined on a proportionate 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 ....
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....ines (Capacity Determination and Collection of Duty) Rules, 2010 (for brevity 'Capacity Determination Rules') as amended effective from 08.03.2010. The rule 2(d) of the said rules described the "packing machine" as follows:- 2(d) "packing machine" includes all types of Form, Fill and Seal (FFS) Machines and Profile Pouch Making Machines, by whatever name called, whether vertical or , with or without collar, single track or multi-track and any other type of packing machine used for packing of pouches of notified goods; Rule 5 of the said rules prescribed the deemed production, based on number of machines and the MRP of the pouches packed, in following manner:- 5. Quantity deemed to be produced. - The quantity of notified goods, having retail sale price as specified in column (2) of the Table below, deemed to be produced by use of one operating packing machine per month, shall be as is equal to the corresponding entry specified in column(3) and column (4) of the said Table, as the case may be:- TABLE S. No. Retail sale price (per pouch) Number of pouches per operating packing machine per month Pouches not containing lime tube Pouches containing lime&n....
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....er MRP products. It essentially means that the capacity of production of larger (more expensive) pouches will be less than the capacity of smaller (cheaper) pouches. Though in real practice it may not away be so. It is therefore apparent that an estimate of deemed production is made on the basis of approximation and duty is levied on basis of such approximate Deemed Production. 5.4 After determination of Deemed Production the duty liability was determined vide notification 16/2010-CE dated 27.2.2010 as follows"- TABLE-1 S. No. Retail sale price (per pouch) Rate of duty per packing machine per month (Rs. in lakh) Unmanufactured Tobacco Chewing tobacco Pouches not containing lime tube Pouches containing lime tube Pouches not containing lime tube Pouches containing lime tube (1) (2) (3) (4) (5) (6) 1. UptoRs. 1.50 8.50 8.00 12.00 11.50 2. From Rs. 1.51 to Rs. 2.00 10.25 9.75 14.25 13.50 3. From Rs. 2.01 to Rs. 3.00 15.25 14.50 21.50 20.25 4. From Rs. 3.01 to Rs. 4.00 19.00 17.75 26.75 25.00 5. From Rs. 4.01 to Rs. 5.00 23.75 22.25 33.50 31.25 6. From Rs. 5.01 to Rs. 6.00 28.50 26.75 40.00 37.50 7. Above Rs. 6.00 28.59 +....
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....he factor relevant to the production on which excise duty is leviable has been notified to be the number of packing machines in the factory of the manufacturer under the Pan Masala Packing Machines (CapacityDetermination and Collection of Duty) Rules, 2008 and the Chewing Tobacco and Unmanufactured Tobacco Packing Machines (CapacityDetermination and Collection of Duty) Rules, 2010 read with section 3A(2) and (3) of the Central Excise Act, 1944. The monthly deemed production per operating machine per month is prescribed based on the average speed of packing machines and average working hours of a factory. Excise duty is chargeable at the rates notified on the basis of Retail Sale Price (RSP) slabs on per machine basis (notification No. 42/2008-C.E., dated 1-7- 2008 and notification No. 16/2010-C.E., dated 27-2-2010 refer). In order to minimize the element of subjectivity and to ensure certainty and objectivity, the number of packing machines installed in the factory has been notified to be the only factor relevant to the production of the notified goods under the said rules. 5. Accordingly, it is clarified that the duty payable under notification No. 42/2008-C.E., dated 1-7-2008 a....
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....ods; It is obvious that the said definition has three parts:- (i) Form, Fill and Seal (FFS) Machines by whatever name called, whether vertical or , with or without collar, single track or multi- track (ii) Profile Pouch Making Machines and by whatever name called, whether vertical or , with or without collar, single track or multi- track (iii) any other type of packing machine used for packing of pouches of notified goods The appellants are claiming that these machines do not fall in any of the three categories. It is not in dispute that these machines are not 'Form, Fill and Seal (FFS) Machines' or 'Profile Pouch Making Machines'. Therefore revenue is of the opinion that these machines fall in the category of "any other type of packing machine used for packing of pouches of notified goods" 5.9 On request of the revenue the use of these machines has been examined by various expertsorganizations like (i) the YMCA Report (ii) the IIT Delhi Report On request of the appellants the machines have been examined by a Chartered Engineer ShriA K Govil.The functioning of the Pedal Filler and Heat Sealer machine (10 gms)wascorrectly summed up in para 3.1 in the argu....
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....ued by Circular No. 341/24/2010-TRU dated 05.03.2010. "I am directed to say that certain issues have been raised by Field formations as well as trade regarding implementation of compounded levy scheme for chewing tobacco and branded unmanufactured tobacco w.e.f 08th March, 2010. Theseissue have examined and the following instructions are being issued in terms of Rule, 19 of chewing tobacco and unmanufactured tobacco packing machine (Capacity determination and collection of duty), Rules, 2010 read with Rule 31 of Central Excise Rules, 2002. 3. Requests have also been received to clarify whether manual packing of pouches of notified goods and their further sealing with the help of heat sealers/band sealers/candles/hot iron would come within the purview of compounded levy scheme or not. The scheme covers the said notified goods manufactured with the aid of packing machine. However, there is no intention to levy duty on compounding basis on pouches which have not been packed with the aid of packing machines but are packed manually with the help of "hand operated fillers or spoons or a similar manually operated device and sealed with heat Sealers/band sealers/candles/hot iron and th....
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....se of "Paddle Filler and Heat Sealer" the same is used for packing 10 gm pouches. The preformed pouches are obtained from outside. The said pouches are held by an operator under the dispenser. The said operator presses a paddle which is pneumatically operated. The said operation of the paddle results in opening of a slot in the equipment for a certain duration and a certain quantity of Tobacco comes out due to gravity. The said pouch is sealed by an operator passing the same between two hot rolls in the sealer attached to the machine itself. The compressor which provides compressed air for the process is operated electrically. (ii) Filler machine (1 Kg) The second equipment, which is used for 1 Kg tobacco pouches, is powered by an electric motor. The tobacco is first filled in the hopper. On pressing of a paddle the said hopper releases approximately 1 kg of tobacco which moves into the pouch under the force of gravity. The weight is corrected on a weighing scale manuallyby an operator. The pouch is then weighted and the amount of tobacco is managed to 1 kg. Thereafter, the said pouch is sealed in a separate sealing machine by an operator. (iii) Filler machine (500 gms ) The th....
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....aling and cannot be bought and sold in the market without sealing. The argument of Revenue is that sealing is not an essential component of the packing process and therefore, if a machine only fills chewing tobacco in the preformed pouches, it is sufficient to qualify as 'packing machine'. We find that this argument is misplaced. For packing of any goods it is necessary that it should make it suitable for safe transport, and in the case of chewing tobacco in pouches, also fit for sale in the market. It is obvious that without sealing the pouches cannot be possibly transported or sold in the retail market for which the same are intended. The other two machines specifically mentioned in the definition of 'Packing Machine', namely Form, Fill and Seal (FFS) Machines and Profile Pouch Making Machines, perform both the functions of filling as well as sealing. There are two machines specifically listed in the definition of the "packing Machine' and both perform the sealing as an integral part of the process. In fact the 'Form, Fill and Seal (FFS) Machines' not only fill and seal but also form the pouch. Forming of pouch is also a part of the packing process in that case, though it may not....
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....ged on compounded basis on goods not packed with 'packing machine' the above circular did not need any further elaboration. The law is that duty on compounding basis cannot be levied on notified goods not manufactured with the aid of 'packing machine'. The description of 'hand operated fillers or spoons or similar manual operated devices/sealers' is just an example cited in the circular and does not necessarily cover all machines which may be outside the ambit of the term 'packing machine'. In view of the above reliance on the circular to say that if these machines do not fall in the category of 'hand operated fillers or spoons or similar manual operated devices/sealers', the same need to be assessed on compounding basis is incorrect. 5.15 One major argument of the revenue is that the disputed machines operate with the aid of electricity and compressed air. It has been argued that only those machines that do not involve the use of electricity or power would be excluded from the purview of the Compounded levy. We do not find any provision in law that prescribes that or supports the contention that if power or electricity is used the machine will become 'Packing machine'. The defini....
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....of the said rules 10 which determines the quantity of production based on the capacity of the machine as well as read with the Notification number 16/2010 makes it clear that the notified goods are goods which are for retail sale produced by using packing machines, as per the table mentioned therein. The explanation 5 in the notification makes it abundantly clear that for the purpose of said notification 'Filter Khaini means chewing tobacco which is packed in sachets of filter paper or fabric before being packed in pouches with the aid of packing machines'. The contention of the revenue is that the aid of packing machines should be for sachet and not for pouch. We are not able to appreciate such interpretation of the explanation. A plain reading of the explanation shows that packing in pouches should be with the aid of packing machines. In this contention, we also refer to clarification issued by the board vide letter dated 53/2010. It was categorically clarified that packing of pouches of notified goods and further filling with the help of manual process will not attract the Chewing Tobacco Rules and duty will be leviable in terms of Section 3 only." COMMISSIONER OF CENTR....
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....llant filed with the Department, the Declaration under Rule 6 of the CT Rules declaring and giving details of '16 FFS machines', 05 nos. of manual sealing / filling and 04 nos. of Tin/ Jar machines and requested the Department to seal all the Packing Machines used in the packing of notified goods in their unit. 12 4. 08.03.2010 Letter of the Deputy Commissioner, Central Excise, informing the Appellant that all machines, including the Tin packing machines are also covered under CT Rules, 2010. 5 10.03.2010 The Appellant's replied to letter dated 08.03.2010 of DC, explaining that the Tin packing machines and the 05 'manual machines' being used by the Appellant are not covered under the ambit of CT Rules, 2010. 6 15.03.2010 The Appellant, vide its letter further explains, in detail, the process and manner in which the Impugned Machines are being operated and used by the Notice. 7 22.03.2010 The Appellant informed the Department that they will be getting one Paddle Operated Filler Machine along with Four Paddle Heat Sealer & two band sealer for manual filling and sealing of the pouch. 8 25.05.2010 The Appellant, pursuant to visit of Anti-Evasion team of the Excise D....
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....cation, but will be taking under production and clearance by way of manual packing of pouches and on machines which did not fall within the ambit of Capacity Determination Rules. That they are filing declaration under Rules 6 of the said Rules 'under Protest' and requested for sealing the FFS machines effective from 07.05.2010. Accordingly, a declaration in Form 1 in terms of Rule 6 of the Capacity Determination Rules was filed by the appellants but only declaring the 16 FFS machines. It is evident from the declaration of the appellants that in Form-1, they had declared only the FFS machines whereas the declaration required all the single track and multi track packing machines available in the factory of the manufacturer of notified goods. In these circumstances it is apparent that appellants had acted as per their declared belief that they are not liable to be assessed under Compounded levy in respect of disputed machines. Revenue has admitted in letterdated 15.03.2010 the appellants haddeclared the working of two of the machines in question as: (i) Dosing machine (for manual pouch filling) (ii) Manual Filling and manual sealing device for zipper pouch. The said machines were....