TaxTMI 
TaxTMI 
2026 (9) TMI 1377
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....venth proviso to Rule 9 of the Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 (hereinafter, "the Rules"), came to be dropped. 2. The facts of the case are that the respondent-assessee was engaged in the manufacture of notified goods under the compounded levy scheme governed by the Rules. In terms of Rule 9 of the Rules, the monthly duty payable on the notified goods was required to be discharged by the 5th day of the same month, and an intimation in Form-II was required to be furnished before the jurisdictional Superintendent of Central Excise by the 10th day of the same month. The second proviso to Rule 9 further contemplated that, in the event of failure on the part of the manufacturer to discharge the duty by the prescribed due date, the outstanding amount would be payable together with interest at the rate specified by the Central Government from time to time. 3. The seventh proviso to Rule 9, which was inserted vide Notification No. 08/2010-C.E. (N.T.) dated 27.02.2010, further provided for a specific consequence in cases where a manufacturer, having failed to discharge the duty payable by the due date, continued to operate any pa....
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....relevant period. According to the Department, the expression "total number of packing machines found available in his premises at any time thereafter" occurring in the seventh proviso to Rule 9 was sufficiently wide to encompass the 22 machines available in the factory. Accordingly, the Revenue proceeded to consider the number of machines as 22 for the purposes of the seventh proviso to Rule 9 and consequently constituted the basis upon which the monthly duty liability was liable to be computed. 5.1. On the aforesaid basis, the Department adopted the rate of duty of Rs.12.50 lakh per packing machine, as prescribed under Notification No. 42/2008-C.E. dated 01.07.2008, and accordingly worked out the monthly duty liability on 22 machines at Rs.2,75,00,000/- (22 x Rs.12.50 lakh) during the applicable period. It was further noticed that the rate of duty was enhanced to Rs.19.00 lakh per machine with effect from 17.03.2012 vide Notification No. 13/2012-C.E. dated 17.03.2012. Upon applying the aforesaid rates and taking into account the number of packing machines which, according to the Department, were available in the respondent's factory premises, the total duty liability for the pe....
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....pplicable provisions of the Central Excise Act, 1944, including the extended period of limitation under the then applicable provisions of Section 11A, read with the relevant provisions of the Rules. In the said notice, it was further alleged that the notified goods manufactured by the respondent during the period of contravention were liable to confiscation under Rule 17 of the Rules and that the respondent was liable to penal consequences under Rule 17(1) thereof read with Section 11AC of the Central Excise Act, 1944, on the allegation of misstatement and suppression of the actual duty liability with intent to evade payment of Central Excise duty. 8.1. The respondent contested the allegations contained in the Show Cause Notice and maintained, in substance, inter alia, that there had been no irregular manner of payment of duty so as to invoke the seventh proviso to Rule 9. The respondent's stand was that the statutory expression had to be understood in the context of machines available for production and not machines which were physically present but sealed and rendered inoperative. The respondent accordingly contended that the Department could not disregard its contemporaneous ....
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....evidence/corroborative facts. Therefore, the adjudicating authority's finding that the uninstalled and sealed machines are to be treated as deemed removal and cannot be held to be found available in the factory, is not at all justified. (iii) The adjudicating authority at Paras 5.7 & 5.8 of the OIO has categorically mentioned /accepted that the Noticee has paid the duty during the period February, 2010 to January, 2013 belatedly and as such it cannot be treated as non-payment of duty. Therefore, the proviso 2 to Rule 9 of Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008, should be made applicable in the case and Proviso 7 to rule 9 of the said Rules will not be applicable in the instant case. The adjudicating authority has however failed to appreciate that intention made in the statute by inserting Proviso 7 to Rule 9 of the Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008. In the proviso, it is mentioned that if the manufacturer does not pay the duty payable by the due date and continues to operate any packing machine, then duty will be leviable on the total number of packing machines found ....
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....t operated the packing machines installed in the factory premises. Therefore, the provisions of proviso 7 to Rule 9 are liable to invoked in the instant case and duty has to be calculate accordingly. Therefore, the observations of the adjudicating authority that proviso 2 to Rule 9 will be applicable in the instant case is not legal, proper and correct. (v) Thus, the adjudicating authority's findings that proviso 2 to Rule 9 will be applicable in the instant case, does not appear to be legal, proper and correct. In this regard, the Revenue places reliance on the decision in the case of Bansal Wire Industries Ltd Vs. State of UP as reported in 2011 (269) ELT-145(S.C.). (vi) Similar view has also been reiterated by the Hon'ble Supreme Court in the case of State of Rajasthan Vs. Basant Agrotech (India) Ltd. as reported in 2014(302) ELT-3(S.C.), while referring to interpretation of statute in fiscal matters, has held that it is to be determined by strict letters of law and not merely on spirit of statutes or substance of law-presumptions and assumptions are entirely out of place. No tax can be imposed by inference or by analogy or by trying to probe intention ....
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....es to manufacture of Pan Masala/Mawa Masala containing tobacco, and in the instant case duty is payable under Pan Masala Packing Machine (Capacity Determination and Collection of Duty) Rules, 2008. Hence, the subject Order-In-Original, is not legally sustainable to the extent mentioned above, and hence requires to be reviewed in terms of Section 35E of the Central Excise Act, 1944. 10.1. In view of the submissions hereinabove, the Revenue prays for setting aside the impugned order and allowing the instant appeal. 11. The Ld. Counsel appearing on behalf of the Respondent, opposing the appeal, inter alia, made the following submissions: (i) The Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 were framed under Section 3A of the Central Excise Act, 1944 for levy and collection of duty on notified goods under the compounded levy scheme. It was submitted that the second and seventh provisos to Rule 9 operate in materially different fields: while the second proviso contemplates a mere default in payment of the duty by the prescribed date and fastens liability towards the outstanding duty together with interest, the seventh proviso is ....
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....ines "found available" had subsequently been clarified by the Ministry in 2010. According to the said clarification, the expression "total number of packing machines found available" was required to be understood as referring to packing machines found available for production, and machines sealed by the Department could not consequently be regarded as machines available in the factory for the purpose of payment of duty. The learned Counsel relied upon the said clarification as also having been noticed in the decision of the Tribunal in CCE, Bangalore v. Trishul Arecanut Granules Pvt. Ltd., reported in 2023 (6) TMI 235 (CESTAT-Bangalore). 11.1. On the strength of the aforesaid submissions, it is argued by the Ld. Counsel for the respondent that the impugned order has correctly appreciated the scope of Rule 9 and therefore the same does not warrant interference. It is thus the respondent's prayer that the Revenue's appeal be rejected and the impugned order dated 28.03.2018 be sustained. 12. Heard both the sides and perused the records of the case. 13. Having considered the rival contentions, we find that the short question which falls for our consideration in the pre....
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....2012-CE (N.T.), dated 17.03.2012) of the Act on outstanding amount, for the period starting with the first date after due date till the date of actual payment of the outstanding amount" Seventh proviso: "Provided also that in case a manufacturer does not pay the duty payable by the due date, and continues to operate any packing machine, then till the time such non-compliance continues, he shall be liable to pay the monthly duty based on the number of operating packing machines declared in the month for which duty was last paid by him or the total number of packing machines found available in his premises at any time thereafter, whichever is higher." 16. A plain but purposive reading of the aforesaid provisions makes it manifest that the two provisos operate in distinct fields. The second proviso is attracted upon a failure to discharge the duty determined for the month within the prescribed due date and, as a consequence thereof, fastens upon the manufacturer the liability to discharge the outstanding duty together with interest for the period commencing from the day following the due date until the date of actual payment. The said provision thus specifically c....
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....herein. The presence of the expression "continues to operate" is not a mere surplusage; it constitutes a substantive condition governing the operation of the latter provision. The provision cannot be subjected to a rigidly literal construction which divorces this condition from the remaining statutory scheme. Rather, the legislative intent has to be gathered from the provision read as a whole and in the context of the Rules, so as to avoid an interpretation which renders any part thereof redundant or nugatory. 19. Weighed against the above, the factual position obtaining in the present case assumes considerable significance. The respondent has stated that, during the material period, it had declared to the jurisdictional authorities that only four packing machines were in operation. The declaration was not clandestine or withheld from the Department; on the contrary, the same was made contemporaneously before the competent authority and the duty liability was thereafter determined on that basis. The respondent has produced the intimation dated 01.02.2010 received from the proper officer, whereby the duty liability with effect from 01.02.2010 was intimated/fixed in response to th....
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.... sealed by the Department would not be considered as machines available in the factory for the purpose of payment of duty. For ready reference, the said clarification is reproduced below: - "F.No.81/17/2007-CX-3 Government of India Ministry of finance Department of Revenue Central Board of Excise and Customs To The Chief Commissioner of Central Excise, Bangalore Subject: Clarification regarding manner of payment of duty under the Pan Masala Packing Machine Rules, 2008. Sir, Kindly refer to your letter C. No. IV/16/319/07.CC (Ex.) BZ dated 03.11.2009 on the above subject seeking clarification in respect of functioning of compounded levy scheme for Gutkha and Pan Masala units. Issues raised in your letter have been examined and following clarification issued with reference to the provision as existed prior to amendment made in Rules in the Budget 2010. 2. Issue: In case of default during any month of the Financial Year, whether monthly duty in all the remaining month of the Financial Year would be computed based on the number of operating machines declared in the month previous to the month of default or machine'....
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....nts are liable to pay duty at this rate during the period of default in view of 7th proviso to Rule 9 of the Rules. . . . 29. In the present case, if the contention of the Revenue is accepted then a person who had not filed a declaration regarding number of packing machines as required under Rule 6 of the Rules and the Revenue found that the manufacturer is using higher number of packing machines than declared and a manufacturer who declared the exact number of packing machines intended to be used by filing declaration under Rule 6 of the Rules are to be treated on the same footing. A manufacturer who was found to be declared less than the number of machines and a person who filed a declaration regarding the number of packing machines to be used cannot be treated on the same footing. The 7th proviso to Rule 9 of the Rules cannot be read in a manner to say that a manufacturer who declared the number of machines by filing necessary declaration and a manufacturer who mis-declared the number of machines are liable for same treatment. 30. In the present case, as the appellant filed declaration in April, 2011 regarding change of number of pack....
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....red view that the adjudicating authority was justified in dropping the demand proposed under the Seventh Proviso to Rule 9 of the Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008. The impugned order, having correctly appreciated the distinction between the statutory consequences flowing from the Second and Seventh Provisos and having found the Respondent's liability to be governed by the former, calls for no interference. 24. In the result, the appeal filed by the Revenue is devoid of merit and is accordingly dismissed. The impugned Order-in-Original No. 31/Commr.Audit/C.Ex/BBSR/2017-18 dated 28.03.2018 is upheld. (Order pronounced in the open court on 18.09.2026) ============= Document 1 GOVT. OF INDIA OFFICE OF THE ASSISTANT COMMISSIONER CENTRAL EXCISE, CUSTOMS & SERVICE TAX, BHUBANESWAR DIVISION: PO-PATIA: BHUBANESWAR-751031. Ph.No. (0674) 2740991, Fax No.(0674) 2743317, e-mail id [email protected] C.NO.IV(15)15/PM-CLS/BBSR/2008/ 613 Date : 01.02.2010. To M/s Meena Zarda Udyog Private Limited (R.C. No. AACCM 4841L XM002) Plot No. B-10, Mancheswar Industrial Estate Bhubaneswar-751010. Sub: Fixation of capacity an....