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2022 (9) TMI 214
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....acture 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) (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 ....
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....tion 11AC of the Act read with Rule 18 of the Capacity Determination Rules and Rule 25 of the Central Excise Rules, 2002. 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....
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....alling under the prescribed Item number; (ii) it must be "Manufactured with the aid of packing machine"; and (iii) it must be "Packed in pouches". Learned Counsel pointed out that these three conditions must 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 horizo....
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....ty for their operation and still have been specifically excluded from the said the Compounded Levy Scheme. 3.6 Learned Counsel pointed out that the term "packing" or "packed" has not been defined under the Notification or the Capacity Determination Rules.Learned 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 n....
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....lled pouch is passed onto 2nd worker which weighs the pouch by putting it manually on a weighing scale. 5. Weight of the pouch is manually adjusted by the 2nd worker as per the required quantity, either by putting in or by taking out tobacco out of the pouch manually. 6. Once the weight is checked, the filled pouch is manually passed 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 Appellan....
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....ain performed on a separate device. Thus, while these devices under consideration are used in one of the steps in the entire process of packing, they do not initiate the process of packing nor do they conclude the process of packing. They only perform one of the steps in the process of packing. 3.11 Learned Counsel argued that Under Rule 6, Declaration as prescribed in Form-1 is to be 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 ....
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....Rule 5 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." (ii) The Hon....
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....en duly given to the Department under Rule 31 of the Central Excise Rules, 2002 vide letter, dated 22.07.2009 and 23.07.2009. This intimation was given to the Department in terms of Circular No. 854/12/2007 dated 07.09.2007 wherein in Para 2.4 it is stated: "In case, the unit brings any new filling and packing machine into the factory, the intimation should be filed before 24 hours of bringing in the said 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 2n....
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.... sealers/candles/hot iron and the like. The Deputy Commissioner never disputed the averment of the Appellant given in its letter dated 10th March, 2010 that these machines are not covered under Compound Levy Scheme (CLS). Neither the Deputy Commissioner asked the Appellant to declare the said machines and/or pay duty on the same underCompound Levy Scheme (CLS). 3.16 Learned Counsel argued that another issue highlighted in 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 rec....
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....Commissioner of Central Excise vs. Tripura Containers Pvt. Ltd. [2011 (264) E.L.T. 339 (Guj.)]; • Union of India vs. Rajasthan Spinning & Weaving Mills [2009 (238) E.L.T. 3 (S.C.)]; • Pushpam Pharmaceuticals Company vs. Collector of C. Ex., Bombay [1995(78) E.L.T. 401 (S.C.)]; 3.19 Learned Counsel argued that Rule 18 of Chewing Tobacco Rules and Rule 25 of the Central Excise Rules, 2002 is subject to Section 11AC of the Act. The said Section mandates mensrea on part of the person before 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 acti....
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....tion in respect of 14 machines as regards their manufacturer were found to be incorrect. It was revealed that the purported manufacturers were in fact dealers of scrap who had been contacted by the employees of the appellants, to issue invoices only i.e. only paper transactions were carried out to route the machines from Gopal Corporation Ltd. i.e. parent company of Gopal Group. The machines were in fact supplied on paper by the sister concerns of the appellants to the purported manufacturers who in turn had issued invoices in favour of 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 Ta....
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....l for revenue found it pertinent to mention that consequent to issuance of SCN to the appellants, they went before the Settlement Commission in respect of part of the demand i.e in respect of the machine used for packing pouches of 10gms, therein admitting their duty liability of Rs.1.02 Cr along with interest which later was revised to Rs.4.09 Cr on the basis of notice issued by the Settlement Commission(since the packing machine was having 4 hoppers) and the same accepted by the appellants and the amount was deposited. However, the Settlement 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 qu....
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....poons or a similar manually operated devices and sealed with heat sealers/band sealers/candles/hot iron and the like. These would be leviable to duty in terms of Section 3 of the Central Excise Act, 1944. It is also clarified that the manufacturer would also be allowed to keep packing material required for packing of such manually packed pouches in his factory premises." 4.12 Learned Counsel for revenue argued that from the reading of the Notification and the clarification given by the Board it is lucid that the process of sealing has not been embedded in the definition of packing machine. 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 s....
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....y a machine which performs all the functions i.e. Forming of Pouch, Filling of Pouch and Sealing of Pouch or Profile Pouch Making should qualify as ‗"any other type of packing machine used for packing of pouches of notified goods".Ld Counsel for revenue pointed out that the definition of a packing machine is just illustrative as the word 'includes' mentioned therein means: i. Includes all types of Form, Fill and Seal machines by whatever names called, whether vertical or horizontal, with or without collar, single- track or multi-track; 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....
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....ines installed", whether operational or not.Relevant Rule 4 & 5 of Capacity Determination Rules are reproduced below: "4. Factor relevant to production. - The factor relevant to the production of notified good shall be the number of packing machines in the factory of the manufacturer. 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: --." 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 n....
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....asions cell visited the premises of the appellant and these machines were also inspected or checked at any point of time. Moreover, it is pertinent to mention here that third machine was never even mentioned in any of the communication (therefore remained undisclosed), whereas other two machines were always stated to be manual machines to be used in case of emergency. The verification of the machines in question was carried out only on 24.07.2010 by the Anti-evasion branch of the Commissionerate, 06.08.2010 by the Anti-evasion branch along with Senior Instructor, Electrical Department from YMCA Institute of Engineering and Technology and on 25.09.2010 by the Anti-evasion branch along 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 re....
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....r 2 machines was also mis-declared and there was wilful misstatement on part of the appellant in order to evade payment of duty under the Compounded levy scheme as the machines were always presented as manual fillers, whereas the same were admittedly pneumatically/compressor controlled and were running with the aid of power. 4.25 Learned counsel for revenue argued that not only the appellant had mis-declared the description of the machines and the use of electricity to run the same, they had also suppressed the number of machines installed in their factory premises. Further, they had also filed wrong declaration in terms of the provisions contained in Rule 6 of Capacity Determination Rules solely 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 ....
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....the machines being used by the appellants and since the appellants had mis- declared/not declared the packing machines, therefore the same amounts to fraud and it is also the settled position of law that fraud vitiated everything. Hence, extended period has rightly been upheld by the adjudicating authority.Ld counsel for revenue relied on the following decisions:- • CCE Vs HMM Ltd -1995(76) ELT 497 (SC) • Kaur & Singh Vs CCE -1997(94) ELT 289 (SC) • CCE Vs Tripura Containers -2011(264) ELT 339 (Guj) • UOI Vs Rajasthan Spg& Weaving Mills -2009(238) ELT 3 (SC) • Pushpam Pharmaceuticals Co.Vs CCE-1995(78) ELT 401 (SC) • GopalZardaUdyogVs CCE-2005(188) ELT 251 (SC) • Commissioner of Customs v Dilip Kumar -2018(69) GST239 4.30 Learned Counsel for revenue argued that 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 Ca....
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....basis of capacity of production in respect of notified goods. - (1) Notwithstanding anything contained in section 3, where the Central Government, having regard to the nature of the process of manufacture or production of excisable goods of any specified description, the extent of evasion of duty in regard to such goods or such other factors as may be relevant, is of the opinion that it is necessary to safeguard the interest of revenue, specify, by notification in the Official Gazette, such goods as notified goods and there shall be levied and collected duty of excise on such goods in accordance with the provisions of this section. (2) Where a notification is issued under sub-section (1), the Central Government may, by rules, - (a) provide the manner for determination of the annual capacity of production of the factory, in which such goods are produced, by an officer not below the rank 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 ....
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....Excise Levy will made on the basis of Deemed Production. 5.2 The product manufactured by the appellants was notified under Section 3A of the Central Excise Act, 1944. In terms of Section 3A of the Central Excise Act, 1944 ("Act") vide Notification No.10/2010-CE (N.T.) dated 27.02.2010, following were declared as the notified goods - "In exercise of the powers conferred by sub-section 1 of Section 3A of the Central Excise Act 1944, the Central Government hereby specifies - i. Unmanufactured Tobacco ; and ii. Chewing tobacco falling under item 2403 99 10 of the said Tariff Act, Manufactured with the aid of packing machine and packed in pouches as notified goods, on which there shall be levied and collected duty of excise in accordance with the provisions of the said section 3A." 5.3 To determine what constitutes a 'Packing Machines' and what shall be the capacity of such 'Packing Machine' the government notified Chewing Tobacco and Unmanufactured Tobacco Packing Machines (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 describe....
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....2246400 2146560 1497600 2 From Re. 1 to Rs. 1.50 2246400 2146560 1497600 3 From Rs. 1.51 to Rs. 2.00 2021760 1921920 1422720 4 From Rs. 2.01 to Rs. 3.00 2021760 1921920 1347840 5 From Rs. 3.01 to Rs. 4.00 1896960 1772160 1272960 6 From Rs. 4.01 to Rs. 5.00 1896960 1772160 1198080 7 From Rs. 5.01 to Rs. 6.00 1896960 1772160 1148160 8 From Rs. 6.01 to Rs. 7.00 1797120 1697280 1098240 9 From Rs. 7.01 to Rs. 8.00 1797120 1697280 1048320 10 From Rs. 8.01 to Rs. 9.00 1797120 1697280 998400 11 From Rs. 9.01 to Rs. 10.00 1797120 1697280 948480 12 From Rs. 10.01 to Rs. 15.00 1697280 1597440 948480 13 From Rs. 15.01 to Rs. 20.00 1597440 1522560 - 14 From Rs. 20.01 to Rs. 25.00 1497600 1422720 - 15 From Rs. 25.01 to Rs. 30.00 1422720 1347840 - 16 From Rs. 30.01 to Rs. 35.00 1322880 1248000 - 17 From Rs. 35.01 to Rs. 40.00 1248000 1173120 - 18 From Rs. 40.01 to Rs. 45.00 1173120 1123200 - ....
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....tions issued from time to time). The actual physical production becomes irrelevant in such circumstances. The sole criterion for the determination of total duty payable is the number of "Packing machines" installed/used and the MRP of the pouches manufactured on respective machines. 5.6 In this regard it seen that even if the actual physical production is higher than the 'deemed production' the duty is levied only on the deemed production determined by 'Capacity Determination Rules'. In this regard the circular of CBEC No. 980/4/2014-CX., dated 24-1-2014 is relevant. It prescribes as follows "Representations have been received from trade and industry that the field formations are following divergent practice of assessment with respect to compounded levy scheme applicable for various tobacco products. Certain field formations have also sought clarification on the excise duty leviable under the said compounded levy scheme. 2. Under the compounded levy scheme, excise duty is chargeable with respect to deemed production based on the number of packing machines in the factory of the manufacturer. The issue raised ....
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....ed 21.07.2011 was issued to the appellants, Directors and employees of the appellants proposing a demand of Rs.250.12 Crores under Rule 19 of the Capacity Determination Rules read with Section 11A(1) of the Act along with interest under Section 11AB of the Act, besides proposing penalty under Section 11AC of the Act read with Rule 18 of the Capacity Determination Rules and Rule 25 of the Central Excise Rules, 2002. 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, Shri. 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). 5.8 Thus the fundamental question which needs to be answered is if the following machines 1. Filler machine (1 Kg) 2. Filler machine (500 gms) 3. Pedal Filler and Heat Sealer machine (10 gms) are 'Packing machines'. The rule 2(d) of ....
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....r generating heat) to enable hot sealing or by guiding the pouch on a band sealer (which again uses electricity to generate heat) to enable sealing, and the pouch is sealed. The functioning of the other two machine was alsocorrectly summed up in para 3.1 in the arguments of Ld Counsel for appellants as follows:- 1. Pre-formed pouches are procured from external sources and are not produced in the factory. 2. These procured pre-formed pouches are held below the hopper by the first worker. 3. On pressing the pedal by the worker, the electricity is triggered which rotates the disc on the hopper from which tobacco is dropped in the pouch due to pneumatic pressure. 5.10 These two machines do not perform weighment or sealing. Those functions are performed on separate machines, operated by different workers. 5.11 We find that the questionnaire sent by the Revenue to the experts was as follows:- It is seen that the first question of the questionnaire asks the expert from IIT if the machines examined are 'Packing machines'. The definition of the packing machine is the subject matter of the entire dispute and the said question has to be answered by the a....
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....rated fillers or spoons or a similar manually operated device" is cited in the circular as an example and not as an exhaustive list of equipment that do not qualify as 'Packing Machines'. There can be many machines, other than those listed in circular, which may not qualify as "Packing machine'.It is seen that this question posed before the expert is defective. The question which needs to be answered is if the disputed machines can be called 'packing machines' in terms of Capacity Determination Rules, 2010 or not. This question can only be answered by Revenue Officers and not by technical experts fromYMCA University of Science and Technology or IIT Delhi. Such expert organization can only be used to get facts regarding the machines and its functions. In the instance case there is no dispute regarding the process undertaken with these machines. The expert reports are useful only to the extent that they describe this process and also describe the fact that electrical energy or compressed air is used in the process of filling and sealing.In view of above the description of the functioning of machine by the experts can be accepted as evidence but the opinions of experts on law points a....
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....justed manually by adding or removing same quality. Thereafter, the pouches are sealed either on a sealer attached to the same machine (in case of "Paddle Filler and Heat Sealer) or on a separate sealing machine. The operation may require two or more persons on each machine/line. 5.13 The first issue raised by the appellant is if the process undertaken on this machine can be called packing at all. It has been argued that the said machines are merely fillers which fill tobacco in the pouches and thereafter the said pouch containing tobacco is passed to a different machine for the purpose of sealing. Revenue has argued that the sealing is not an essential requirement for packing. It was argued that the Notification No. 10/2010-CE (N.T) dated 27.02.2010 notified chewing tobacco manufactured "with the aid of a packing machine and packed in pouches" as notified goods. Learned Counsel for revenue argued that it was not necessary that the entire process of packing should happen on one machine. We do not find force in this argument of revenue for the reason that the same Notification No. 10/2010- CE (N.T) also defines the terms 'packing machine'. Thus, each and every machine used in the....
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.... Scheme vide Board clarification dated 05.03.2010.Moreover even revenue in their final synopsis have stated as that sealing is part of process of packing. From the reading of the Notification and the clarification given by the Board it is lucid that the process of sealing has not been embedded in the definition of packing machine. 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 linking the definition of packing but is one of the process for packing of Chewing tobacco in pouches. Thus even revenue and Board recognizes sealing as one of the processes for packing. That implies that packing is not complete without sealing. 5.14 Learned Counsel for the revenue has relied on the Circular No. 341/24/2010-TRU, dated 05.03.2010 to assert that only if the goods are packed with the help of "hand operated fillers or spoons or a similar manually operated device and sealed with heat Sealers/band sealers....
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....ara 5.9 above that the lowest number of pouches manufactured per month prescribed in this notification is 17,97,120, and duty has been fixed on that basis. That quantity works out to manufacturing capacity of 41 pouches per minute nonstop 24 hrs a day seven days a week.The disputed machines which operate with manualintervention cannot possibly operate at such speeds continuously nonstop throughout the year. The manual operation involves picking up an empty pouch, holding it under the dispenser, correcting the weight, putting it in sealing machine and then sealing the same. It is apparent that these machines are not of the same kind or speed that are specifically mentioned in the definition of 'Packing Machine'. This is another reason to reject the revenue allegations. 5.17 Another argument of the appellants is that theForm 1 needs to be filed by the assesses in terms of Rule 6 of the Capacity Determination Rules 2010. This form, inter alia, requires he manufacturer to declare the capacity of the machines. The appellants have argued that capacity of automatic machines can be determined but if the machines require such high level of human intervention there is no way to determine ....
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....manually and the pouch is sealed with the help of hot iron/band sealer, it cannot be said that the plastic pouches are packed with the help of packing machine." The ratio of these decisions also applies to the appellant's case. 5.19 The appellants have raised the issue of limitation also. We find that the revenue's case does not hold on merits so the issue of limitation becomes secondary. In the instant case we find that the revenue has strongly relied on the apparent misdeclaration in the description or source of procurement of various machines. Revenue has sought to invoke extended period of limitation on the grounds that the appellants had mis-declared the names of machines or obtained machines from dubious sources. Even if we assume the allegations to be correct, for the reasons that we found that the machines found in their premises do not qualify as 'Packing Machine' such allegations, even if true, become irrelevant. 5.20 Revenue has alleged that the appellants had not filed the required declaration under the rules. The appellants have taken us through following communicationsbetween Department & Appellant before and after the introduction of Compounded Levy Scheme: ....
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....ere covered under CT Rules, 2010. Certificate of Sealing issued. Sealing and de-sealing register was also maintained under the signatures of the Department officer. There also, only 16 FFS machines were entered. 2 17.03.2010 Second Visit of Dept. The Department, after the visit to the premises for physical verification, informs the Appellant that on re-examination that there is no levy of duty on compounding basis on Tin packing machines and 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 similar manually operated device and sealed with heat sealers/band sealers/candles/hot iron and the like. 13 3 22.03.2010 Third Visit of Deptt. The Commissioner, Additional Commissioner, Superintendent and Inspector of Central Excise visits the premises of the Appellant. 4 5.4.2010 & 7.4.2010 On the request of the Appellant dated 05.04.2010 to shift 4 FFS machines to its other unit, the said machines were removed under the physical supervision of the Superintendent Excise vide his Certificate of Removal dated 07.04.2010 5.21 Revenue has argued that in letter dated 02.03.20....
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.... not liable to be assessed under Compounded levy in respect of such machines and their behaviour is according to that belief.Revenue has admitted that in letter dated 25.05.2010 the appellantsagain gave note on the working two machines which was earlier also informed vide their letter dated 15.03.2010 but this time they mentioned about the use of electricity in both the machines and also described the machines as 'manual filling and manual sealing device for zipper pouch'. 5.22 Revenue has also not denied that the appellants had declared these machines under Rule 31 of the Central Excise Rules, 2002 vide letter, dated 22.07.2009 and 23.07.2009 in terms of Circular No. 854/12/2007 dated 07.09.2007 even before the Compound Levy Scheme was conceptualized. Appellants have argued that the they were using manually operated machines, using electricity at the time of notification of Capacity Determination Rules.That the machines in questions, were acquired in July, 2009. Learned Counsel argued that an intimation had been duly given to the Department under Rule 31 of the Central Excise Rules, 2002 vide letter, dated 22.07.2009 and 23.07.2009. This intimation was given to the Department i....