Custom, Excise & Service Tax Tribunal
S.M. Perfumers Pvt Ltd vs Commissioner Of Central Excise, ... on 13 October, 2015
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH BANGALORE Appeal(s) Involved: E/2444/2010-DB, E/2445/2010-DB, E/2446/2010-DB [Arising out of Order-in-Appeal No. 31-2010 dated 06/09/2010 passed by the Commissioner of Central Excise, Bangalore-I] [Arising out of Order-in-Appeal No. 32-2010 dated 06/09/2010 passed by Commissioner of Central Excise, Bangalore-I] [Arising out of Order-in-Appeal No. 33-2010 dated 06/09/2010 passed by Commissioner of Central Excise, Bangalore-I] For approval and signature: HON'BLE SMT ARCHANA WADHWA, JUDICIAL MEMBER HON'BLE SHRI ASHOK K ARYA, TECHNICAL MEMBER 1 Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? No 2 Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? Yes 3 Whether Their Lordships wish to see the fair copy of the Order? Seen 4 Whether Order is to be circulated to the Departmental authorities? Yes S.M. PERFUMERS PVT LTD NO.112A, BOMMASANDRA INDUSTRIAL AREA, BANGLAORE RURAL, KARNATAKA 560099 Appellant(s) Versus Commissioner of Central Excise, Customs and Service Tax BANGALORE-I POST BOX NO 5400...CR BUILDINGS, BANGALORE, - 560001 KARNATAKA Respondent(s)
Appearance:
Mr. G. Shivadas, Adv For the Appellant Mr. Ajay Saxena, A.R. For the Respondent Date of Hearing: 12/10/2015 Date of Decision: 12/10/2015 CORAM:
HON'BLE SMT ARCHANA WADHWA, JUDICIAL MEMBER HON'BLE SHRI ASHOK K ARYA, TECHNICAL MEMBER Final Order No. 22048-22050 / 2015 Per : ARCHANA WADHWA All the three appeals are being disposed of by a common order as the issue involved is identical.
2. After hearing, at length both sides represented by Shri G. Shivadas learned advocate for the assessee along with Shri Somesh Arora, learned advocate and Shri Ajay Saxena learned A.R. for the Revenue, we find that the appellant is engaged, inter alia, in the manufacture of pan masala containing tobacco commonly known as gutka and falling under Chapter 24 of the Central Excise Tariff Act 1985. The appellant is registered with the central excise department for payment of duty of excise on their final product with effect from 01.07.2008 in terms of the provisions of Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules 2008, which came into existence vide Notification No. 30/2008 CE(NT) dated 01.07.2008. The said Rules provide a detailed procedure as also various provisions for payment of duty of excise on the basis of capacity of production in terms of the said rules. Briefly speaking the capacity of production was required to be determined in relation to the number of packing machines installed in a manufacturers premises and put to use.
3. It is seen that the appellants were declaring the number of packing machines which were to be used for production of the said product in a particular month at the start of the month itself. The duty liability was being discharged by them accordingly based upon the number of packing machines so used and declared by them. It may not be out of context to mention here that appellants were found to be using the same number of machines which were being declared by them in their various declarations filed from month to month. It may also be observed that in terms of the said rules, number of machines which were not put to use in a particular month are required to be sealed by the Revenue. In the instant case, the machines not declared in the declarations so filed by the appellants were being sealed by the Revenue and there is no dispute about the said fact.
4. During the period from July 2008 to September 2009, covered in all the three appeals, the appellants were depositing the duty in advance at the start of the month itself, and were reflecting their duty liability in the monthly returns being filed by them. In terms of the said rules, an assessee is required to discharge its duty liability by 5th of a month in which goods are going to be produced and cleared. In other words, duty is required to be paid in advance and file an intimation to the range Superintendent by 10th of that month. The returns are required to be filed in the subsequent month.
5. The appellants have been observing all the above said procedures. However, there were delays in depositing the amount by the appellant ranging from one day to 28 days in various months covered during the period in question. Such duties were being deposited by them subsequently along with interest leviable thereon for the number of delays which have occurred in a particular month. The said demand of interest by the appellant was in accordance with 2nd proviso to Rule 9 of the said rules.
6. However, Revenue entertained a view that inasmuch as the appellant has defaulted in payment of duty on account of delayed payments, they are required to discharge their duty liability in terms of tProviso-7 of the said Rule. The said Proviso is to the effect that whenever there is a default of payment of duty, the number of machines available for production have to be considered and if they are higher than the machines actually used for production, then the duty liability would be redetermined accordingly. In terms of the said view of the Revenue, proceedings were initiated against the appellant by way of issuance of three show-cause notices for different periods. The said proceedings stand culminated into the impugned orders passed by the Commissioner vide which he confirmed the demand of duty of around Rs. 21 crores along with interest and imposition of equal amount of penalty. Hence the present three appeals of the assessee.
7. We find that the dispute in the present appeals relates to the interpretation of the provisions of Rule 9 of the said Rules and the various provios specified therein. For better appreciation we reproduce the entire Rule 9 along with the provisos.
9.?Manner of payment of duty and interest. - The monthly duty payable on notified goods shall be paid by the 5th day of same month and an intimation in Form - 2 shall be filed with the Jurisdictional Superintendent of Central Excise before the 10th day of the same month :
Provided that monthly duty payable for the month of July, 2008 shall be paid on or before 15th day of July, 2008 :
Provided further that if the manufacturer fails to pay the amount of duty by due date, he shall be liable to pay the outstanding amount along with the interest at the rate specified by the Central Government vide notification under section 11AB of the Act on the outstanding amount, for the period starting with the first day after due date till the date of actual payment of the outstanding amount :
Provided also that in case of increase in the number of operating packing machines in the factory during the month on account of addition or installation of packing machines, the differential duty amount, if any, shall 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 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 in case it is found that a manufacturer has manufactured goods of those retail sale prices, which have not been declared by him in accordance with provisions of these rules or has manufactured goods in contravention of his declaration regarding the plan or details of the part or section of the factory premises intended to be used by him for manufacture of notified goods of different retail sale prices and the number of machines intended to be used by him in each of such part or section, the rate of duty applicable to goods of highest retail sale price so manufactured by him shall be payable in respect of all the packing machines operated by him for the period during which such manufacturing took place :
Provided also that in case a manufacturer does not pay the duty payable, and continues to operate any packing machine, he shall be liable to pay the duty for the remaining months of the financial year 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.
8. As is seen from above, Proviso-2 to the said Rule refers to a situation where a manufacturer fails to pay the amount of duty on due date, he shall be liable to pay the outstanding amount along with interest at the rates prescribed by the Central Govt till he pays the amount in question. There is no further reference to any additional liability on the assessee to pay the duty even in respect of the machines which have not been actually put to use by him during that particular month. The said proviso simpliciter makes the assessee liable to pay the duty along with interest. However, Revenue has referred to Proviso-7, which also talks about the assessee having not discharged his duty liability. The contention of the Revenue is that in terms of the said Proviso, where an assessee does not discharge his duty liability in time, his liability for the subsequent months would be dependent upon the total number of packing machines found available in his premises at any time thereafter, if the number of such machines is higher than the number of machines used by the assessee for production.
It is seen that initially show-cause notice was issued to the appellant proposing confirmation of demand of duty based upon the total number of machines installed in their factory which may not have been put to use for production of the final product at any point of time. The said machines though installed in the appellants factory, were under seal of the Revenue and were never used. During adjudication, the appellants took a categorical stand before the adjudicating authority that the demand of duty by taking into consideration the number of machines installed in their factory even though they were sealed right from the beginning and were never used for production of pan masala at any point of time is not justified. The said plea of the appellants stand accepted by the adjudicating authority, who limited the demand to the number of machines used in the previous month of the manufacture in which duty was paid belatedly. As the number of machines used by the assessee for the previous month or in some case for the subsequent month were higher than the actual number of machines used by them, he adopted the higher number of machines in terms of the said proviso-7 and accordingly confirmed the duty along with interest and imposition of penalty.
9. The legal issue which emerges out of the said factual position is whether it is only the Proviso- 2 to Rule 9 which has to be adopted in case of failure of an assessee to deposit the duty liability well in time or whether the reference to Proviso-7 was justified. It is the contention of the appellant that if we read Rule 9 in its entirety, the same covers the manner of payment of duty and interest. 2nd Proviso to the said Rule refers to a situation where an assessee is unable to deposit the amount by the 5th of a particular month in which the production has taken place and there is a delay in depositing such amount. The Proviso simpliciter provides for confirmation of interest till the payment of the duty by an assessee. The subsequent provisos covers situations which are altogether different and not at all relatable to the disability of an assessee to deposit the amount in time. Proviso-6 which relates to a circumstance and a situation which can, in common parlance, be termed as clandestine activity of a manufacturer. Proviso-7 is admittedly relatable to Proviso-6 and covers an activity of non-payment of duty by an assessee, based upon his contumacious conduct. It is the contention of the learned advocate that if Proviso-7 to the said Rule refers to normal delay of deposit of the admitted liability, then the same would have found its place immediately after Proviso-2 relating to the same situation. Having found its place after Proviso-6, it has to be interpreted that Proviso-7 is referring to a situation as available in Proviso-6.
10. On the other hand, learned JCDR submits that there is no force in the submissions of the learned advocate that Proviso-7 is independent of Proviso-2 and it is not related to a situation covered in Proviso-2. Merely because the said two provisions are separated by 5 provisos in between, it cannot be said that the same relates to a different situation. He submits that there is no justification to show that Proviso 6 & 7 have to be read in consonance. For the above purposes, he refers to and relies upon the Boards Circular No. 341/09/2008 TRU dated 27.07.2009. He submits that the said circular makes it clear that if there is default in payment of duty by an assessee then the duty liability for the subsequent months would be determined based upon the available number of packing machines installed and used in the factory, during the preceeding or succeeding months.
11. In his rejoinder learned advocate draws our attention to a subsequent letter of the department dated 20.04.2010 wherein clarification to Proviso-7 to Rule 9 stands given. In answer to a certain question, it stands clarified by the Board that default in payment of duty for one month would not be treated as default for all the remaining part of full financial year and such default would continue till the duty for the said month is paid. In respect of another question, it stands clarified by the Board that the total number of packing machines found available has to be interpreted as to mean packing machines found available for production. Therefore, the machines which have been sealed by the department would not be considered as the machines available in the factory for production and would not be taken into account for the purpose of payment of duty. It is the contention of the learned advocate that the said clarification given by the Board supports their case. He clarified that when at the start of every month they declared a particular number of machines available for production, the balance number of machines were invariably sealed by the Revenue. As such, the number of machines available in the factory for the purpose of payment of duty has no reference to such sealed machines as is clear from the above clarifications. He also submits that the said legal issue stands considered by the Tribunal in the case of Sanket Food Products Vs CCE [2015 316 ELT 501 (Tri Mum)].
12. After considering the submissions made by both sides, we find that there is no dispute about the factual position. There is no allegation of any misdeclaration against the assessee as regards the number of machines used for production of goods or the retail sale price of the pouches declared by them. The Commissioner has confirmed the demand of duty by adopting Proviso-7 to Rule 9 and by discarding the assessees contention that incase of delayed payment of duty it is only Proviso-2 which has to be adopted. Apart from the fact that we agree with the learned advocates contention that Proviso 7 essentially refer to a situation envisaged by Proviso-6 and will have no applicability to a situation which stands separately considered by Proviso 2 to the said Rule, we find that the issue stands covered by the majority decision of the Tribunal in the above referred situation. Originally there was difference of opinion between Member (Technical) and Member (Judicial) in the above decision of the Tribunal in the case of Sanket Food Products (supra). Learned Member (Technical) by adopting identical arguments which stand adopted before us by the Revenue held against the assessee. Learned Member (Judicial) differed with the said order and the matter was placed before the 3rd Member. The 3rd Member while dealing with the issue observed as under:
25. The Revenue? confirmed the demand in view of the proviso to proviso 7 to Rule 9 of the Rules. The admitted facts of the case are that the appellants were in default in making payment of duty as per the order of the proper officer in pursuance the declaration filed by the appellant under Rule 6 of the Rules. The appellant filed a fresh declaration in the month of April, 2011 declaring the number of packing machines intended to be used for the manufacture of pan masala. After due verification, the declaration was accepted and the annual capacity of the machine was fixed and the appellants were liable to pay duty at Rs. 6,36,50,000/- per month with effect from April, 2011. As the appellants were in default the Revenues contention is that the appellants 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 misdeclared the number of machines are liable for same treatment.
13. Inasmuch as the facts in the present case are identical to the facts involved in the case of Sanket Food Products (supra), we find no reasons to take a different view. As such by adopting the said decision we set aside the impugned orders and allow all the appeals with consequential relief.
(Order pronounced in open court) ASHOK K ARYA TECHNICAL MEMBER ARCHANA WADHWA JUDICIAL MEMBER pnr 10