TaxTMI 
TaxTMI 
2026 (9) TMI 1915
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....ati-II Commissionerate was set aside. The dispute relates to determination of the maximum packing speed of Rotary Type Single Track FFS Machine, Sl. No. 101023098, Make - Sanko (hereinafter referred to as "the subject machine"), for the purpose of determination of duty liability under the Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008, as amended (hereinafter referred to as "the Rules"). 2. The facts of the case are that the Respondent, holding Central Excise Registration No. AAACD0132HXM009, is engaged in the manufacture of excisable goods, namely Pan Masala falling under Tariff Item No. 21069020 of the Central Excise Tariff Act, 1985, notified under Section 3A of the Central Excise Act, 1944. In terms of Rule 6 of the Rules, the Respondent submitted an application dated 08.12.2015, along with a declaration in Form-I, seeking permission for operation of 01 (one) packing machine with effect from 00:00 hrs of 21.12.2015. The details of the packing machine proposed to be operated, as declared by the Respondent, are set out below: Sl. No. Description of Packing machine Identification number of machine Product name, weight & Retai....
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....was of the view that the machine, after undergoing the aforesaid technical modifications, in the absence of any proof, could not be said to be operating at the same maximum packing speed as originally specified for the said machine. It was also noticed that the Respondent had not intimated the Department regarding the modifications carried out in the machine at any point of time and had not produced any certificate or other technical evidence establishing that the modified machine was capable of operating at the declared speed of 301-750 pouches per minute for manufacture of Rajnigandha Pan Masala, as claimed by them. The adjudicating authority accordingly did not accept the original manufacturer's quoted speed as determinative for the modified machine, particularly as the quotation pertained to the manufacture of 'Double Maza' in the twin-pack configuration and the machine had thereafter undergone technical modification involving removal of certain original functions/components. 4. Accordingly, the Order No. 56/Capacity/ACGII/2015-16 dated 18.12.2015 came to be passed, wherein the ld. adjudicating authority principally observed as follows: (i) Original procurement ....
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....ject Rotary Type Single Track FFS Machine, Serial No. 101023098, Make - Sanko, was liable to be treated as a machine having a maximum packing speed of 751 pouches per minute and above. In the absence of any cogent evidence establishing the claimed maximum packing speed of 301-750 pouches per minute for the modified machine while manufacturing Rajnigandha Pan Masala of 18 grams (+10% extra), RSP Rs.50/- per pouch, the declared category was not accepted. Consequently, the Respondent was required to discharge duty in respect of the said machine in terms of Rule 9 of the Pan Masala Packing Machines (Capacity Determination & Collection of Duty) Rules, 2008, read with Notification No. 06/2015-CE dated 01.03.2015. 5. Aggrieved by the aforesaid determination, the Respondent preferred an appeal before the Ld. Commissioner (Appeals), Customs, Central Excise & Service Tax (NER), Guwahati. The Ld. Commissioner (Appeals), vide Order-in-Appeal No. 68/GHY/CE(A)/GHY/2016 dated 20.12.2016, however, set aside the order passed by the adjudicating authority and allowed the appeal filed by the Respondent. While doing so, the learned Commissioner (Appeals) principally relied upon the earlier determin....
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....s originally procured for manufacture of Double Maza, a twin-pack pouch containing Zarda scented chewing tobacco and Pan Masala, and was accordingly equipped with additional side sealers and a corresponding feeding system; that the machine was subsequently modified in-house by removing the additional side sealers and altering the feeding system so as to manufacture only Pan Masala. It is his submission, such technical modification materially altered the original configuration of the machine; yet, the Respondent neither intimated the Department regarding the modification nor produced any reliable technical certificate establishing the maximum speed of the modified machine. Consequently, it is his contention that the original manufacturer's quoted speed of 370-400 pouches per minute, which pertained to the twin-pack Double Maza configuration, could not be treated as determinative of the capacity of the modified machine. It was therefore submitted that, having itself admitted the modification and having declared only a range of 301-750 pouches per minute, without establishing any basis for capping the machine's maximum speed below 751 pouches per minute, the Respondent's d....
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....ation by way of removal of certain original functions/components meant for production of Double Maza. The assessee also could not produce any certificate, whatsoever, in regard to speed of the machine to produce the new product. Since originally the machine was not designed to manufacture the said product and the manufacturer's quotation specify the speed only for production of Double Maza which is a twin pack pouch consisting Zarda scented chewing Tobacco and Pan Masala, the original speed quoted by the manufacturer cannot be taken into consideration. Under the circumstances, the adjudicating authority determined the speed of the machine at higher slab i.e 751 pouches per minute and above for manufacture of Rajanigandha Pan Masala 18 gms. (Plus 10% extra) pouch (RSP- Rs. 50/-) and determined the duty accordingly, which is under dispute. (ii) The learned Commissioner (Appeals) failed to comprehend the whole issue and conceded to the plea taken by the assessee that once approval was accorded to the maximum speed of the machine as below 750 pouches per minute cannot be changed under any circumstances, without reviewing the earlier order. He failed to appreciate that the ....
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....ute. (iv) In his order the Commissioner (Appeal) has considered the actual packing capacity of the machine which never exceeded 750 ppm during July 2015 to October 2015. He failed to notice that the data on which he has relied is submitted by the assessee based on the actual production during the period and not relevant for determination of the maximum speed of the machine. The Commissioner (Appeals) has given undue magnitude on such data which is not pertinent to assessment of capacity of the machine. The learned Commissioner (Appeals) failed to appreciate that the scheme of the said Rules is not to ascertain the actual speed at which the machine runs. The Rules speaks about the maximum speed of the machine i.e. the ultimate speed and not the speed at which the assessee runs it. Since this is a scheme of "Compounded Levy" in terms of Sec. 3A of the Central Excise Act 1944, the levy is on the capacity of the machine and not on production of goods. As such, there is no scope that the onus would lay with the department to determine the capacity on the basis of actual speed at which the assessee runs the machine. (v) The learned Commissioner (Appeals) repeatedly stre....
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....djudicating Authority did not consider necessary to go for trial run once again. (vi) The learned Commissioner (Appeals) failed to appreciate the amendment made vide Notification dated 05/2015 in the Pan Masala Packing Machine (Capacity Determination & Collection of Duty) Rules, 2008. The amendment is necessarily related to the maximum packing speed being the underline factor for determining the duty payable. The sole legislative intention to levy duty on the pan-masala pouch packing machine is on their inherent maximum pouch packing speed per minute (i.e. the maximum pouch packing capacity of the machine). After the issue of Notification 05/2015, the assessee's attempt to manipulate the machine and to claim reduced packing speed is only with the view to escape the rightful duty which they were otherwise required to pay. The conduct of the assessee is not only ex-facie illegal, impermissible but also is an attempt to defeat the purpose and object of the legislative intent of the Notification No. 05/2015. Further the said goods were notified under Section 3A in view of the nature of the process of manufacture or production, the extent of evasion of duty in regard to suc....
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....cation" before approving the declaration. Admittedly, no enquiry or verification was conducted and the Ld. AC proceeded purely on the presumption that the appellant will alter the speed of the machine by way of simple in-house modification of the machine at any time at their will. The Ld. Commissioner (Appeals) has recorded categorical findings that the earlier orders were passed after due verification under Rule 6(2)/(6), were never challenged, and that the impugned OIO was passed without enquiry. on presumption, and in disregard of binding final orders is violative of judicial discipline and unsustainable. Change of parameters, including maximum packing speed, is permitted under Rule 6(6) (i) Rule 6(6) permits subsequent changes to "any of the parameters" declared under sub-rule (2). The conversion of the machine from a twin-pack FFS (for "Double Maza") to a single-pack FFS (for Rajnigandha Pan Masala) by removal of the additional side sealers with a corresponding change in the feeding system is precisely such a change. Crucially, the maximum speed of the changed machine was itself examined and approved by the Department at 301 750 PPM through the physical trial....
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....month SI. No. Retail Sale Price (per pouch) Upto pouches minute 300 per 301 to pouches minute 750 per 751 pouches per minute and above (1) (2) (3) (4) (5) 1 Up to Re 1.00 6864000 11232000 24960000 2 From Rs. 1.01 to Rs. 1.50 6864000 11232000 24960000 3 From 1.51 to Rs. 2.00 6520800 10670400 23712000 4 From 2.01 to Rs. 3.00 6520800 10670400 23712000 5 From 3.01 to Rs. 4.00 6314880 10333440 22963200 6 From 4.01 to Rs. 5.00 6314880 10333440 22963200 7 From Rs. 5.01 to Rs. 6.00 6314880 10333440 22963200 8 Above Rs. 6.00 6177600 10108800 22464000 11.2. The rate of duty per packing machine per month is calculated as per Notification No. 42/2008 dated 01.07.2008, as amended, vide Notification No. 06/2015 dated 01.03.2015. As per the said Notification, the rate of duty is to be calculated as under: - ....
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....d for packing of notified goods of various retail sale price and determine and pass order concerning the annual capacity of production of the factory within three working days in accordance with the provisions of these rules." [Emphasis supplied] 12. In this case, it is a fact that the appellant had originally procured one Sanko FFS Machine bearing Serial No. 101023098, which was procured for manufacture of "Double Maza", which is a twin pack pouch consisting Zarda scented chewing Tobacco and Pan Masala. Thus, over and above the normal side sealer in FFS machine, this machine used to have additional side sealers for creating two compartments in the pouches generated, one for carrying Zarda scented chewing Tobacco and the other for carrying Pan Masala. The said machine was modified in-house removing additional side sealers incorporated in the original machine and by changing the feeding system for filling only Pan Masala instead of both Zarda scented chewing Tobacco and Pan Masala. 12.1. The ld. adjudicating authority found that after modification of the machine, the maximum packing speed of the same at which it can be operated had not been determined and the respondent had....