Whether abatement of duty for closure of machines under Rule 10 be allowable to the assessee on monthly basis?

PJ/Case Laws/2012-13/1499

Case:- COMMISSIONER OF C. EX., LUCKNOW Versus K. P. PAN PRODUCTS PVT. LTD.

Citation:- 2013 (288) E.L.T. 478 (Tri.- Del.)

Brief Facts:-The Assessee is manufacturers of Gutkha and Pan Masala chargeable to Central Excise duty. During the period of dispute, they were discharging duty liability in terms of Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 [hereinafter referred to as PMPM Rules]. The Pan Masala/Gutkha Packing Machines were in uninstalled condition during the period from 10-3-2010 to 1-4-2010 and thereafter again from 8-4-2010 to 1-5-2010. The respondent claimed abatement of duty for these periods of closure of the factor/ in terms of Rule 10 of the PMPM Rules. The abatement was sanctioned by the Jurisdictional Assistant Commissioner for these periods. The Commissioner reviewed these orders of the Assistant Commissioner under Section 35E (2) of the Central Excise Act holding that the same are not legal and proper as the abatement under Rule 10 of PMPM Rules can be granted only for continuous period of 15 days or more falling in a month and therefore the abatement for 1st April 2010 (1 day) and 1st May 2010 (1 day) was not available to the respondent and has been wrongly allowed by the Assistant Commissioner. Accordingly, the Assistant Commissioner was asked to file an application to the Commissioner (Appeals) under Section 35E (4) of Central Excise Act, which is to be treated as an appeal by the department. These review appeals under Section 35E (4) filed by the department were decided by the Commissioner (Appeals) vide orders-in-appeal No. 267/CE/LK0/2011 and 268/CE/LK0/2011 each dated 31-5-2012 by which the department's appeals were dismissed. Against these orders of the Commissioner (Appeals), these two appeals have been filed by the Revenue.

Appellant Contentions:-The Appellant submitted that the impugned orders by reiterating the grounds of appeal in the Revenue's appeal and specifically pleaded that while allowing abatement during the period from 10-3-2010 to 1-4-2010 and thereafter again from 8-4-2010 to 1-5-2010, the Commissioner has failed to appreciate that as per the Pan Masala Packing Machine Rules, the excise duty is required to be paid on monthly basis and, as such, for the purpose of allowing abatement to the assessee under Rule 10, the period of abatement has to be considered on monthly basis only.

Reasoning of Judgment:-We have considered the submissions of the learned department representative and perused the records. In case of Pan Masala/Gutkha manufacturing units, the duty liability is required to be discharged under the provisions of Section 3A of the Central Excise Act, 1944 read with PMPM Rules, 2008. According to the provisions of Rule 7 of the PMPM Rules, duty payable by a unit for a particular month shall be calculated by application of the appropriate rate of duty specified in the Notification No. 42/2008-C.E., dated 1-7-2008 to the number of operating packing machine in the factory during the month. In terms of Rule 8 of the PMPM Rules, the number of operating packing machines during a month for the purpose of Rule 7 is to be taken as the maximum number of packing machines installed on any day during the month. However, under Rule 10 of the PMPM Rules, proportionate abatement of duty can be allowed for the period when the entire factory was closed and had not produced or cleared any goods, during a continuous period of 15 days or more, subject to the conditions as specified in this rule. Rule 10 is reproduced below:-
"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 filed an intimation to this effect with the Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, with a copy to the Superintendent of Central Excise, at least seven days prior to the commencement of said period, who on receipt of such intimation shall direct for sealing of all the packing machines available in the factory for the said period under the physical supervision of Superintendent of Central Excise, in the manner that these cannot be operated during the said period :
Provided that during such period, no manufacturing activity, whatsoever, in respect of notified goods shall be undertaken and no removal of goods shall be effected by the manufacturer:
Provided further that when the manufacturer intends to restart his production of notified goods, he shall inform to the Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, of the date from which he would restart production, whereupon the seal fixed on packing machines would be opened under the physical supervision of Superintendent of Central Excise."

From a reading of this Rule, it is clear for the purpose of abatement, the following conditions are to be satisfied:-
·         The period of closure of the factory should be a continuous period of 15 days or more ;
·         The intimation regarding closure is required to be given to the Deputy/Assistant Commissioner with a copy to Jurisdictional Superintendent at least 7 days prior to the closure who shall forthwith seal all the packing machines in such a manner that the same cannot be operated. Thereafter when the manufacturer intends to re-start the production, he is required to inform the Jurisdictional officers well in advance, who shall unseal the machine and supervise the reinstallation;
·         During the period of closure, neither any pan masala/gutkha pouches would be manufactured nor there would be any clearance of any goods.
·         From the perusal of Rule 10, it is clear that there is nothing in this rule from which it can be concluded that for the purpose of abatement, the period of closure should be within a calendar month only and should not span over a period of two consecutive calendarmonths.

In view of the above, when during first period of closure, the unit was closed from 10-3-2010 to 1-4-2010 and during second period when it was closed from 8-4-2010 to 1-5-2010, the abatement for the entire period including for 1st April 2010 and 1st May 2010 has been correctly allowed. There is nothing in Rule 10 from which it can be concluded that the period of closure should be apportioned calendar monthwise and then it should be considered for abatement under Rule 10. In our view, the department's interpretation of Rule 10 is totally incorrect. We do not find any infirmity in the impugned orders. The Revenue's appeals, therefore, are dismissed.

Decision:-Appeal allowed.

Comment:-It is concluded from this case that often the provisions are misinterpreted to contain conditions that are not at all specified in the law. In this case also, the abatement provision simply contains the condition that factory should be closed for a continuous period of 15 days but since the duty is payable on monthly basis, it was misconceived by the department that abatement cannot be granted of 1 day in a month.

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PJ/Case Laws/2012-13/1499

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