TaxTMI 
TaxTMI 
TaxTMI 
2022 (11) TMI 1537
X X X X Extracts X X X X
X X X X Extracts X X X X
....11 dated 3.3.2011 01.11.2010 21.02.2011 7993296 22266667 E/863/2012 53-54/M-I/2011 dated 29.2.2012 04.08.2009 28.01.2010 15591121 18517729 Total 64368813 1.2 As the issue and facts are commons, the appeals are being taken up together for hearing and disposal. For ease we refer to the order in the appeal No E/863/2012. "ORDER 26. In view of above discussion and findings, I pass the following order:- i) I confirm the duty amounting to Rs. 1,55,91,121/- (Rupees one crore fifty five lakhs ninety one thousand one hundred twenty one only) for the period 01.07.2008 to 31.12.2008 demanded in show cause notice dated 04.08.2009 and amounting to Rs. 1,85,17,729/- (Rupees one crore eighty five lakhs seventeen thousand seven hundred twenty nine only) for the period 01.01.2009 to 30.09.2009 demanded in show cause notice dated 28.01.2010, on pan masala manufactured and cleared by M/s. Godfrey Philips India Ltd., Sahar Road, Chakala, Andheri East, Mumbai- 400 093, under the provision of notification No. 42/2008-C.E. dated 01.07.2008 read with Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 and section 11A of the Central Excise ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....(NT) dated 1.7.2008, pan masala was specified as notified goods falling under the Tariff item 21069020 and 29039990 to the first schedule of the Tariff with the condition that it is 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 Section 3A (compounded levy). Notification of even date No. 30/2008-CE (NT) was also issued under Section 3A(2) and (3) to notify the Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008. Notification No. 42/2008-CE notified in exercise the powers under Section 3A(3) of the Central Excise Act notified the rate on the unit of production for pan masala/gutkha manufactured with the aid of packing machine and packed in pouches, as per RSP as mentioned in the table, the rate of duty specified in the corresponding entry in column 3 and 4 of the Table 1. Notification No 44/2008-CE dated 16.07.2008 rescinded the Notification No 38/2007-CE dated 19.12.2007. As consequence the manufacturer of pan masala had no option but to pay the excise duty on the notified goods on the deemed production basis, a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....i Gajendra Jain with Ms. Payal Nahar, Advocates for the appellant and Shri Dhirendra Kumar, Joint Commissioner, Authorized Representative for the revenue. 3.2 Arguing for the appellant learned counsel submits that: ➢ Two factors which are sine qua non to attract duty in terms of Notification No 42/2008-CE i.e. o Manufacture with the aid of packing machines o Packed in pouches meant for the sale for a price to be declared as retail sale price Are absent in present case and hence the demand made in terms of the said Notification is not applicable. ➢ Borrowing tariff value from a Notification issued under Section 3 for the purpose of levying duty under Section 3A of the Central Excise Act, 1944 is not permissible. ➢ Notification No 42/2008_CE is self contained code, o revenue could not have resorted to Pan masala Rules, 2008 for computing RSP. o It applies to goods manufactured with the aid of packing machines and do not apply to goods deemed to be manufactured with the aid of packing machines. ➢ There was no packing machine installed in the factory of the appellant since May 2008 and hence there cannot be any demand under Compounded levy s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ns and rules framed in this regard. 19. M/s GPIL in their submissions detailed herein above have contended that (i) notices were issued based on incorrect understanding of facts and without any enquiry being conducted; (ii) production based levy only applicable if a manufacturer undertook commercial production; (iii) compounded levy scheme not applicable on hand filled pan masala pouches produced in pilot test plant, as the said scheme is applicable only to pan masala manufactured with the aid of packing machine and packed in pouches; (iv) in the absence of retail sale price, the compounded levy scheme was not applicable as in such case neither the deemed production capacity nor the rate of duty can be determined; (v) section 3A of the Act being an anti abuse provisions, the said provisions and the relevant notifications issued and rules framed be read in context of the object and scope of the provisions of section 3A and excise liability be restricted to duty payable on actual quantity manufactured; (vi) pan masala produced in pilot test plant were not marketable therefore, did not qualify as notified goods to attract levy of excise duty under the compounded levy sch....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 within ten days of the said rules, coming into force. 21. As stated herein above, one packing machine was installed is an undisputed fact. M/s. GPIL, after introduction of the Pan Masala Packing Machines (Capacity Determination And Collection of Duty) Rules, 2008, had in their letter dated 01.12.2008 stated that they had installed one pan masala packing machine for packing samples. The revenue authorities, after pan masala was notified as specified goods, had requested M/s GPIL to pay central excise duty in terms of notification No. 42/2008-C.E. dated 01.07.2008 and comply with the rules laid down under the Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008. However, in spite of requests, they maintained that as no commercial production had commenced of pan masala, they were not required to pay duty on deemed production basis. This contention of M/s GPIL is misplaced. The proviso to rule 6(x) of the Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 provides that a new manufacturer shall file declaration at least fifteen d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....instant case, M/s GPIL were engaged in the manufacturer of pan masala well before the said rules came into force and the packing machine was already available/installed in the factory is on record. Therefore, they were required to file the declaration on or before 10.07.2008 which they failed to file. I find that M/s GPIL was an existing unit already engaged in the manufacture of with the use of available / installed packing machine since March, 2008 hence, with the introduction of the said rules it was obligatory for them to file a declaration to that effect on or before 10.07.2007. I find that the option for filing of such declaration at least 15 days prior to the commencement of commercial production of notified goods was applicable to new manufacturers of pan masala. M/s GPIL being engaged in the manufacture of pan masala before the introduction of the said rules, the option to file declaration 15 days prior to commencement of commercial production was not available to them. M/s. GPIL have also contended that since May, 2008 the pouches were hand filled as the packing machine had developed technical snags. However, if that was the case the same was required to be declared in th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rily required, the annual capacity of production could not be determined by the appropriate authority. In view of the facts and circumstances of the instant case, this contention of M/s GPIL is not found tenable. 24. M/s GPIL have also contended that section 3A of the Central Excise Act,. 1944 being a anti abuse provision, the said section and notifications issued thereunder ought to be read in the context of the object and scope of the provisions of section 3A of the Act and excise liability is to be restricted to duty payable on actual quantity manufactured. I observe in this context that section 3A reads as under:- ..... The provision of section 3A(1) starts with the words " Notwithstanding anything contained in section 3 ". These words make it clear that once the goods are notified under section 3A the question of payment of central excise duty on actual manufacture basis would not be in conformity with the provisions of section 3A. In the instant case, as pan masala was specified as notified goods, the duty is leviable on deemed production basis. M/s GPIL, as detailed hereinabove, had not complied with the Pan Masala Packing Machines (Capacity Determination and Collectio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 unit of such factor; and (ii) provide for the determination of the annual capacity of production of the factory ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... (i) pan masala falling under tariff item 2106 90 20 of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), except the pan masala containing not more than 15% betel nut; and (ii) pan masala containing tobacco, commonly known as gutkha, falling under tariff item 2403 99 90 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. 2. This notification shall come into force on the 1st July, 2008. Explanation. - For the purposes of this notification, "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." 4.5 Plain reading of the provisions of the section 3A suggests that the for the reason this section starts with a "non obstante" clause, the Central Government is empowered to notify the goods in respect of which the provisions of Section 3 of th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lding and giving a definite shape to such pouches with a view to distinguish the brand or to prevent the counterfeiting of the goods, etc., two such tracks or lines shall be deemed to be one individual packing machine for the purposes of calculation of the number of pouches per operating packing machine per month. 6. Declaration to be filed by the manufacturer. - 1) A manufacturer of notified goods shall, immediately on coming into force of these rules, and, in any case, not later than ten days, declare, in Form 1, - (i) the number of single track packing machines available in his factory; (ii) the number of packing machines out of (i), which are installed in his factory; (iii) the number of packing machines out of (ii), which he intends to operate in his factory for production of notified goods; (iv) the number of multiple track or multiple line packing machine, which besides packing the notified goods in pouches, perform additional processes involving moulding and giving a definite shape to such pouches with a view to distinguish the brand or to prevent the counterfeiting of the goods, etc; (v) the number of multiple track or multiple line packing machines out of (i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....en granted subject to the modifications, if any, which the Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, may communicate later on but not later than thirty days of filing of the declaration. 3) The annual capacity of production shall be calculated by application of the appropriate quantity that is deemed to be produced by use of one operating packing machine as specified in rule 5 to the number of operating packing machines in the factory during the month beginning which the capacity is being determined. 4) The number of operating packing machines during any month shall be equal to the number of packing machines installed in the factory during that month. 5) The machines which the manufacturer does not intend to operate shall be uninstalled and sealed by the Superintendent of Central Excise and removed from the factory premises under his physical supervision: Provided that in case it is not feasible to remove such packing machine out of the factory premises, it shall be uninstalled and sealed by the Superintendent of Central Excise in such a manner that it cannot be operated. 6) In case a manufacturer wishes to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 the date of such discontinuation or commencement and the duty liability for the month shall not be discharged unless the differential duty is paid by the 5th day of the following month and in case the amount of duty so recalculated is less than the duty paid for the month, the balance shall be refunded to the manufacturer by the 20th day of the following month: Provided also that if there is revision in the rate of duty, 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 the date of such revision and the duty liability for the month shall not be discharged unless the differential duty is paid by the 5th day of the following month and in case the a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....all be ascertained by the Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, in the following manner, namely:- (i) if the manufacturer has manufactured and removed identical goods, within a period of one month, before or after removal of such goods, by declaring the retail sale price, then, the said declared retail sale price shall be taken as the retail sale price of such goods. (ii) if the retail sale price cannot be ascertained in terms of (i), the retail sale price of such goods shall be ascertained by conducting the enquiries in the retail market where such goods have normally been sold at or about the same time of the removal of such goods from the place of manufacture: Provided that if more than one retail sale price is ascertained under (i) or (ii), then, the highest of the retail sale price, so ascertained, shall be taken as the retail sale price of all such goods. Explanation.- For the purposes of this rule, when retail sale price is required to be ascertained based on market inquiries, the said inquiries shall be carried out on sample basis. (iii) Where a manufacturer alters or tampers the retail sale pric....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 11.45*(8-6) lakhs= Rs. 91.90 lakhs Explanation 1. - For the purposes of this notification, "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. Explanation 2. - For the purposes of this notification, if there are multiple track or multiple line packing machine which besides packing the specified goods in pouches, perform additional processes involving moulding and giving a definite shape to such pouches with a view to distinguish the brand or to prevent the counterfeiting of the goods, etc., two such tracks or lines shall be deemed to be one individual packing machine for the purposes of calculation of the duty liability. Explanation 3. - For the purposes of this notification, "retail sale price" means the maximum price at which the specified goods in packaged form may be sold to the ultimate consumer and includes all taxes, local or otherwise, freight, transport charges, commission payable to dealers, and all charges towards ad....
X X X X Extracts X X X X
X X X X Extracts X X X X
....duced and cleared. Admittedly in the present case the goods were cleared in the pouches on which no RSP has been specified, as these were not cleared for the retail sale but were cleared for specific purpose of market research and testing. Specific provision has been made under Pan Masala (CD&CD) Rules, in terms of the Rule 6, 7 and 9 to prescribe the manner in which the scheme will be made operational. Proviso to Rule 9 provides to deal with the situations ➢ wherein if the manufacturer is found to be manufacturing the notified goods with the aid of packing machine and not paying duty as specified ➢ for the manner of determination of duty in respect of clandestine manufacture and/or clearance. Further these goods were not produced using the packing machines. It is the contention of the appellant that the samples cleared by them were not manufactured of power operated packing machines but were made by hand filling and hence the provisions of these rules do not apply to them. They also contend admittedly a fact not in dispute that the sample packs were meant for consumption within the factory and for market research hence cleared without declaration of any RSP. We ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ansfer took place. In this case, transfer took place on 18.7.1969. The second test which needs to be applied is the test of allocation/attribution. This test is spelt out in the judgment of this Court in Mugneeram Bangur & Co. (supra). This test applies to a slump transaction. The object behind this test is to find out whether the slump price was capable of being attributable to individual assets, which is also known as item-wise earmarking. The third test is that there is a conceptual difference between an undertaking and its components. Plant, machinery and dead stock are individual items of an Undertaking. Business Undertaking can consists of not only tangible items but also intangible items like, goodwill, man power, tenancy rights and value of banking licence. However, the cost of such items (intangibles) is not determinable. In the case of CIT v. B.C. Srinivasa Setty reported in (1981) 128 ITR 294, this Court held that Section 45 charges the profits or gains arising from the transfer of a capital asset to income-tax. In other words, it charges surplus which arises on the transfer of a capital asset in terms of appreciation of capital value of that asset. In the said judgment,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....te and player, cable T.V. operations, the collection machinery is in-built and provided within the respective provisions of section 3-A and section 3-B. and in those two cases the collection of duty does not take place under section 4 of the 1936 Act." 4.11 Authorized representative has in his submissions referred to the decisions as follows: ➢ Godfrey Philips India Ltd [2019 (369) ELT 706 (T-Mum)] 11. On the issue of abatement on sealing of machines, Revenue's contention is that if one machine is sealed and the remaining machines available in factory are functional, then abatement for the closure period for that machine is not allowed, unless the 'factory' as a whole remain closed for the period for which the abatement is claimed. The relevant Rule 10 of PMPM Rules, 2008 reads as under :- "10. Abatement in case of non-production of goods. - In case a factory 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 provided the manufacturer of such goods files an intimation to this effect with the Deputy Commissioner of Central Excise or the Assistant....