Custom, Excise & Service Tax Tribunal
M/S. Lok Nath Prasad Gupta, vs C.C, Ex - Kol Iii on 12 September, 2023
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE
TRIBUNAL, KOLKATA
EASTERN ZONAL BENCH : KOLKATA
REGIONAL BENCH - COURT NO.1
Excise Appeal No.951 of 2011
(Arising out of Order-in-Original No.17/COMMR/CE/KOL-III/2010-11 dated
29.08.2011 passed by Commissioner, Central Excise, Kolkata-III.)
M/s. Lok Nath Prasad Gupta
(R.K.Dev Path, P.O. Titagarh, 24-Parganas (North), Kolkata-700119.)
...Appellant
VERSUS
Commissioner of Central Excise, Kolkata-III
.....Respondent
(GST Bhawan, 180, Shantipally, Rajdanga Main Road, Kolkata-700107.) WITH
(i) Excise Appeal No.70460 of 2013 (M/s. Lok Nath Prasad Gupta Vs. Commissioner of Central Excise, Kolkata-III); (ii) Excise Appeal No.70461 of 2013 (M/s. Lok Nath Prasad Gupta Vs. Commissioner of Central Excise, Kolkata-III); (iii) Excise Appeal No.75041 of 2014 (M/s. Lok Nath Prasad Gupta Vs. Commissioner of Central Excise, Kolkata-III); (iv) Excise Appeal No.75042 of 2014 (M/s. Lok Nath Prasad Gupta Vs. Commissioner of Central Excise, Kolkata-III);
(i) (Arising out of Order-in-Original No.15/COMMR/CE/KOL-III/2012-13 dated 25.02.2013 passed by Commissioner, Central Excise, Kolkata-III.)
(ii) (Arising out of Order-in-Original No.16/COMMR/CE/KOL-III/2012-13 dated 25.02.2013 passed by Commissioner, Central Excise, Kolkata-III.)
(iii) (Arising out of Order-in-Original No.05/COMMR/CE/KOL-III/2013-14 dated 14.11.2013 passed by Commissioner, Central Excise, Kolkata-III.)
(iv) (Arising out of Order-in-Original No.06/COMMR/CE/KOL-III/2013-14 dated 18.11.2013 passed by Commissioner, Central Excise, Kolkata-III.) APPEARANCE Shri Rahul Tangri & Ms. Udita Saraf, both Advocates for the Appellant (s) Shri S.Mukhopadhyay, Authorized Representative for the Revenue CORAM: HON'BLE SHRI ASHOK JINDAL, MEMBER(JUDICIAL) HON'BLE SHRI K. ANPAZHAKAN, MEMBER(TECHNICAL) 2 Excise Appeal No.951 of 2011 Excise Appeal Nos.70460 & 70461 of 2013 AND Excise Appeal Nos.75041 & 75042 of 2014 FINAL ORDER NO.76675-76679/2023 DATE OF HEARING : 12 September 2023 DATE OF DECISION : 12 September 2023 Per : ASHOK JINDAL :
All the appeals are having common issue therefore all are disposed of by a common order.
2. The facts of the case are that the appellant is engaged in the manufacture of Chewing Tobacco (Split Tobacco, without lime tube) falling under Tariff Sub-heding No.24039 9100 of the First Schedule to the Central Excise Tariff Act, 1985 using the single-track Form, Fill and Seal packing machines installed in its factory.
3. In terms of Notification No.10/2010-CE(NT) dated 27.02.2010 read with Rule 2(c) of the Chewing Tobacco & Unmanufactued Tobacco Packing Machines (Capacity Determination & Collection of Duty) Rules, 2010 (Rules), goods manufactured by the appellant qualified as 'notified goods' and were thus, leviable to central excise duty on the basis of capacity of production under Section 3A of the Central Excise Act and not on the basis of actual production and clearance. The rate of duty on chewing tobacco had to be determined in terms of the Notification No.16/2010-CE dated 27.02.2010 read with Rule 7 of the Rules.
4. In accordance with Rule 6 of the Rules, the Appellant had filed declaration during the relevant period, disclosing relevant information viz., number of packing machines available at the factory, number of machines installed, retail price of the pouch, details of final product etc. In the said declarations, the Appellant also declared the maximum speed at which the machines can be operated for packing notified goods viz. 90 - 100 pouches per minute
5. The above declarations filed by the Appellant were duly verified by the concerned jurisdictional officer and necessary enquiries were 3 Excise Appeal No.951 of 2011 Excise Appeal Nos.70460 & 70461 of 2013 AND Excise Appeal Nos.75041 & 75042 of 2014 also made including physical verification. Thereafter, the declarations filed by the Appellant were approved by the Assistant Commissioner vide separate orders, determining duty payable by the Appellant per month was determined in terms of Rule 7 of the Rules, by multiplying the number of operating packing machines with the rate of duty per month per packing machine as per Rule 7 read with Notification No.16/2010-CE.
6. The Appellant duly discharged its duty liability, as determined by the jurisdictional officer for each months, and declared the same in monthly ER-1 returns, along with the details of production and clearance of the finished goods.
7. Since the actual production was higher than the deemed annual capacity of production, as determined by the department in terms of Rule 5 of the Rules, the present proceeding was initiated against the Appellant vide issuance of SCN dated 06.04.2011, 01.02.2012, 30.04.2012 and 18.10.2012 for the relevant period.
8. The abovementioned SCN was issued on the allegation that the Appellant had manufactured and cleared goods in excess of the production capacity as determined by the Assistant/Deputy Commissioner of Central Excise in terms of Rule 5 of the Notification.
Thus, duty demand was proposed on the actual production of goods, which was used to arrive at number of machines mathematically required (disregarding the actual machines installed and operated during the relevant period) to manufacture the same on the basis of deemed production capacity under Rule 5. Such notional number of machines,mathematically arrived at,was multiplied with the rate of duty per machine as per Notification NO. 16/2010 to arrive at the duty demand.
9. The above demand was consequently confirmed by the Ld. Commissioner of Central Excise on the ground that the Appellant had deliberately produced and cleared goods more than the determined capacity. Further, with respect to Excise Appeal No. 4 Excise Appeal No.951 of 2011 Excise Appeal Nos.70460 & 70461 of 2013 AND Excise Appeal Nos.75041 & 75042 of 2014 E/75041/2014and E/75042/2014, as a corollary to the computation of demand, it is also observed that as per Explanation to Rule 5 of the Rules, merely number of operating machines installed in the factory during the month is not the criteria for determining capacity of production but also number of track or line on the machine and if a packing machine has more than one track or line, then each such track shall be deemed to be one individual packing machine. Since, in the present case, then each packing machine is producing almost twice the quantity, as determined by Assistant Commissioner, therefore irrespective of the fact that the machine of the Appellant is single track-line, it will be considered as two machines for the purpose of payment of duty.
10. Against the said orders, the appellant is before us.
11. The Ld.Counsel, appearing on behalf of the appellant submits that the issue has been settled by the Circular issued by CBEC and various decisions in their favour, wherein it has been held that no further demand is payable on the basis of actual production of goods, therefore, impugned orders are to be set aside.
12. Heard the parties, considered the submissions.
13. We find that after adjudication of the impugned matters, CBEC issued a Circular No.980/4/2014-CX dated 24.01.2014, which is extracted below for ease of convenience :-
Circular No. 980/4/2014-CX., dated 24-1-2014 F.No. 354/120/2011-TRU Government of India Ministry of Finance (Department of Revenue) Central Board of Excise & Customs, New Delhi Subject : Divergent practices of assessment with respect to compounded levy scheme applicable for smokeless tobacco products - Regarding.
Representations have been received from trade and industry that the field formations are following divergent practice of assessment with 5 Excise Appeal No.951 of 2011 Excise Appeal Nos.70460 & 70461 of 2013 AND Excise Appeal Nos.75041 & 75042 of 2014 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 is whether excise duty can be re-determined based on the speed of the packing machine and actual production thereof, which may be higher than the deemed production.
3. Presently, the mandatory compounded levy scheme is applicable to Pan Masala, Gutkha and chewing tobacco manufactured with the aid of packing machine & packed in pouches. The factor relevant to the production on which excise duty is leviable has been notified to be the number of packing machines in the factory of the manufacturer under the Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 and the Chewing Tobacco and Unmanufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010 read with section 3A(2) and (3) of the Central Excise Act, 1944. The monthly deemed production per operating machine per month is prescribed based on the average speed of packing machines and average working hours of a factory.
Excise duty is chargeable at the rates notified on the basis of Retail Sale Price (RSP) slabs on per machine basis (notification No. 42/2008- C.E., dated 1-7-2008 and notification No. 16/2010-C.E., dated 27-2- 2010 refer). In order to minimize the element of subjectivity and to ensure certainty and objectivity, the number of packing machines installed in the factory has been notified to be the only factor relevant to the production of the notified goods under the said rules.
5. Accordingly, it is clarified that the duty payable under notification No. 42/2008-C.E., dated 1-7-2008 and notification No. 16/2010-C.E., dated 27-2-2010 may be determined based on deemed production with respect to the number of operating packing machines in the factory during the month and the Retail Sale Price printed on the pouches and not on the basis of actual production by a unit.
6. Trade Notice/Public Notice may be issued to the field formations and taxpayers.
7. Difficulties faced, if any, in implementation of this Circular may be brought to the notice of the Board.
8. Hindi version follows."
The said Circular clearly clarifies that duty is to be paid by the assessee in terms of the Chewing Tobacco & Unmanufactued Tobacco Packing Machines (Capacity Determination & Collection of Duty) Rules, 2010, which has been determined by the adjudicating authority and on 6 Excise Appeal No.951 of 2011 Excise Appeal Nos.70460 & 70461 of 2013 AND Excise Appeal Nos.75041 & 75042 of 2014 that basis the appellant has paid the duty, therefore, if during physical verification production is found more, no duty is payable by the appellant and the said issue also examined by this Tribunal in the case of Kaipan Pan Masala Pvt.Ltd. v. Commissioner of C.Ex., & S.T., Bhopal [2016 (344) E.L.T. 662 (Tri.-Del.)], wherein this Tribunal observed as under:-
"7. During the period under dispute, the deemed production of Gutkha was determinable under Rules 4 and 5 of the Capacity Determination Rules, 2008. According to Rule 4 of the said Rules, the relevant factor was the number of machines installed in the factory. Rule 5 of the said Rules fixes the deemed quantity manufactured, by use of one packing machine, with retail sale price printed on the pouch. The above provisions read with the C.B.E. & C. Circular dated 24-1-2014 makes the position clear that the relevant factor to be considered for determination of production, is the number of operating machines installed in the factory during the month and the retail sale price printed on the pouches and not on the basis of actual production. It is clear from the above Circular of C.B.E. & C. that number of packing machines, operating during the month, is the only relevant factor which forms the basis for determination of deemed production and the duty liability, in terms of Rule 5 of the Capacity Determination Rules, 2008; and not any other factor such as, speed of the machines, etc. The impugned orders, adopting the declared speed of the machines as the basis and consequently determination of the deemed quantity of production, are not correct and hence not sustainable under the law."
14. As in the matters in hand, the appellants were paying duty in terms of Notification No.16/2010-CE(NT) dated 27.02.2010 read with Rule 10 of Chewing Tobacco & Unmanufactued Tobacco Packing Machines (Capacity Determination & Collection of Duty) Rules, 2010, therefore, the appellant paid correctly and no further duty is payable by the appellant on the basis of actual production, which was found higher than the deemed annual capacity of production.
7 Excise Appeal No.951 of 2011Excise Appeal Nos.70460 & 70461 of 2013 AND Excise Appeal Nos.75041 & 75042 of 2014
15. Further, we find that in Appeal Nos.75041 & 75042 of 2014, the issue has been raised by the adjudicating authority that merely number of operating machines installed in the factory during the month is not the criteria for determining capacity of production but also number of track or line on the machine and if a packing machine has more than one track or line, then each such track shall be deemed to be one individual packing machine. Since, in the present case, then each packing machine is producing almost twice the quantity, as determined by Assistant Commissioner, therefore irrespective of the fact that the machine of the appellant is single track line, it will be considered as two machines for the purpose of payment of duty. The said issue has been examined by this Tribunal in the case of Dharampal Satyapal Ltd. v. CCE, Noida [2016 (343)E.L.T. 662 (Tri.-Del), wherein this Tribunal has observed as under:-
"7. Thus, the duty per machine per month payable by an assessee has been specified under Notification No. 42/2008-C.E. for different RSP slabs and for this purpose in case of multiple line/multiple track machine, where the multiple track are not for performing additional processes involving moulding or giving definite shape to pouches with a view to distinguish the brand or to prevent the counterfeiting of the goods, each track is to be treated as one single machine. The Board vide Circular No. 980/4/14-CX, dated 24-1-2014 has clarified that in the cases where the actual production of the machine because of some manufacturer operating the machine at the highest possible speed is more than the deemed production, no differential duty is to be charged. The dispute in this case has to be looked at on the basis of these principles.
8. The dispute in the present case is about PK-90 FFS Machine of duplex model supplied by PKIL, Vadodara. There is no dispute that it is a duplex machine in the sense that while only one laminate roll is fed into the machine with zip, two pouches are cut at a time and therefore, the speed of production of this machine is about two times 8 Excise Appeal No.951 of 2011 Excise Appeal Nos.70460 & 70461 of 2013 AND Excise Appeal Nos.75041 & 75042 of 2014 the packing speed of simplex model of such machine. The point of dispute is as to whether this is to be treated as two track machine and hence it is to be treated as two machines or it is to be treated as single track machine.
9. In a multi-track machine, there are more than one parallel path traced by the pouches as they are formed and later filled and all the pouches in the same track follow the same path. The multiple track/multiple line machines operate with multiple rolls of laminate and the purpose of operating a multi-line/multi-track machine is to consolidate space and economise on electronic processors and machine operators. As per the technical literature of the supplier, the machine, in question, is a duplex machine and as such there is only one track along with the pouches are formed and are later filled. The only innovation in this machine that on the same line or track at a time two pouches are cut and filled as a result of which two pouches are formed, filled and sealed resulting in much higher speed of production of pouches. This is clear from the report dated 15-10-2010 of IIT Professor Shri S. Sanghi of Applied Mechanical Department and Professor Shri S. Mukherjee of Mechanical Engineering Department of IIT, Delhi. This report also clearly classifies the machine, in question, as a single track duplex machine. In our view there is absolutely no basis for the Commissioner's finding that it is a multiple track machine. Just because the speed of this machine is much higher than the normal machines, it cannot be treated as a multiple track machine."
And the said order has been affirmed by the Hon'ble Allahabad High Court as reported in the case of Commissioner of Central Excise v. Dharampal Satyapal Ltd. [2016 (333) E.L.T. 283 (All.)] and the said order has been accepted by the department.
16. In that circumstances, we hold that the said machine shall be considered as duplex single track line machine and no further duty is to be demanded from the appellant.
9 Excise Appeal No.951 of 2011Excise Appeal Nos.70460 & 70461 of 2013 AND Excise Appeal Nos.75041 & 75042 of 2014
17. In view of this, we do not find any merits in the impugned orders and the same are set aside and appeals are allowed with consequential relief, if any.
(Operative part of the order was pronounced in the open Court.) Sd/-
(ASHOK JINDAL) MEMBER (JUDICIAL) Sd/-
(K. ANPAZHAKAN) MEMBER (TECHNICAL) sm