Allahabad High Court
Commissioner Of Central Excise 117/7 ... vs M/S Trimurti Fragrances Pvt. Ltd. ... on 23 October, 2019
Bench: Bharati Sapru, Rohit Ranjan Agarwal
HIGH COURT OF JUDICATURE AT ALLAHABAD AFR Reserved on :26.09.2019 Delivered on:23.10.2019 CENTRAL EXCISE APPEAL No.16 of 2017 Commissioner of Central Excise, Kanpur Vs. M/s Trimurti Fragrances Pvt. Ltd., Kanpur Connected with CENTRAL EXCISE APPEAL No.92 of 2017 Commissioner of Central Excise, Kanpur Vs. M/s Trimurti Fragrances Pvt. Ltd., Kanpur ***** Hon'ble Bharati Sapru, J.
Hon'ble Rohit Ranjan Agarwal, J.
(Delivered by: Rohit Ranjan Agarwal, J.)
1. These two appeals filed under Section 35-G of the Central Excise Act, 1944 arise against the order of the Customs, Excise and Service Tax Appellate Tribunal, Allahabad (hereinafter called as "CESTAT"), dated 7.6.2016. As the issue in both the appeals are same, hence they are heard and decided together.
2. Appeal No.16 of 2017 was admitted on 23.5.2019 on the following questions of law:
"(i) Whether the Hon'ble CESTAT has erred in not taking the cognizance of the provision of Rule 7 and Rule 9 of Pan Masala Packing Machines (Capacity Determination and Collection of Duty), Rules, 2008 which provides that:
Rule 7. Duty payable to be calculated. -
The duty payable for a particular month shall be calculated by application of the appropriate rate of duty specified in the notification of the Government of India in the Ministry of Finance (Department of Revenue), No.42/ 2008-CE, dated the 1st July, 2008 to the number of operating packing machines in the factory during the month.
Rule 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 by the due date, and continues to operate any packing machine, then till the time such non-payment 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:
Provided also that in case a new manufacturer commences production of notified goods in a particular month, his monthly duty payable for that month shall be calculated pro-rata on the basis of the total number of days in the month and the number of days remaining in that month starting from the date of commencement of the production of such notified goods and shall be paid within five days of such commencement.
(ii) Whether the Hon'ble CESTAT has erred in not taking cognizance that neither the party is a new manufacturer nor they have changed their Retail Sale Price (RSP) of 05 machines, which were used for the manufacture of Gutkha of MRP of Rs.2.00 during the month of November, 2012.
During the month of November, 2012, the parety operated the following machines for 12 days (i.e. 19.11.2012 to 30.11.2012)
- 06 Pouch Packing Machines of Gutkha of MRP Rs.1.00; and
- 05 Pouch Packing Machines of Gutkha of MRP Rs. 2.00.
As per Notification No. 42/ 2008-CE, dated the 1st July 2008 read with Rule 7 of the Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008, during the month of November-2012, the rate of duty per machine per month for Pouch of MRP. 1.00 was Rs. 19 lakhs and for Pouch of MRP Rs. 2.00 was Rs. 36 lacs.
It is stipulated under proviso 4 of Rule 9 of the Pan Masala Rules, 2008 that if a manufacturer 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 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. Therefore, in view of the above proviso 4 of Rule 9 of the Pan Masala Rules, 2008, applicable for computation of their duty liability for the month of November, 2012 as under:-
- the party was required to pay the Central Excise duty on pro-rata basis for total 12 days (from 19.11.2012 to 30.11.2012) on 06 pouch packing machines of MRP Rs. 1.00 that remained operative during the said period, which comes to Rs.45,60,000/- @ 19.00 lakhs per machine per month and this duty was to be paid by the 5th day of the following month [i.e. 5th December, 2012], as the pouches of MRP Rs. 1.00 was new retail price for the said party.
- the party was required to pay full duty on 05 machines used for the manufacture of Gutkha of MRP Rs. 2.00, which works out to Rs. 1,80,00,000/- @ Rs.36.00 lakhs per machine per month and this duty was to be paid by 5th of the same month, as the pouches of MRP Rs. 2.00 was not a new retail price for the party.
- thus, the total duty liability of the party for the month of November, 2012 works out to Rs. 2,25,60,000/- [Rs. 45,60,000/- of Gutkha MRP Rs. 1.00 on 06 machines + Rs. 1,80,00,000/- of Gutkha MRP Rs. 2.00 on 05 machines] as per the provisions of Pan Masala Rules, 2008 but the party paid Rs. 1,17,60,000/- only for the month of November, 2012 which resulted into short payment of Rs. 1,08,00,000/- for the month of November- 2012.
(iii) When the Apex Court in the case of M/s Madhumilan Syntax Ltd vs Union of India- 2007(210) ELT 484 (SC), the Apex Court held that once a statute requires to pay tax and stipulates period within which such payment is to be made, the payment must be made within that period.
(iv) When the Apex Court in the case of State of Jharkhand & Others vs. Ambey Cement & Anr. [ 2004(178) ELT 055(SC)], has held that it is a cardinal rule of the interpretation that where a statute provides that a particular thing should be done, it should be done in the manner prescribed and not in any other way.
(v) When the judgment of the Hon'ble High Court, Delhi relied on by the CESTAT in the instant case in the case of CCE vs. Shakti Fragrances Pvt. Ltd. [2015(324) E.L.T. 390] does not appear to be identical to the instant case.
(vi) Whether, in view of the provisions of Rule 7 & 9 of Pan Masala Packing Machines (Capacity Determination and Collection of Duty), Rule, 2008 and aforementioned rulings by Apex Court, the confirmation of demand & recovery of the short paid duty amounting to Rs.1,08,00,000/- for the month of November, 2012 alongwith interest and penalties should have been upheld by the Hon'ble CESTAT?
3. On 19.9.2019, learned counsel for the appellant was permitted to add the following substantial question of law, which reads as under:
"1). Whether in view of the provisions of Rule 9 and Rule 10 of the Pan Masala Packing Machine (Capacity Determination and Collection of Duty) Rules 2008, the manufacture is required to pay the duty for the whole month and thereafter seek rebate for non working days or the manufacture can suo moto take the benefit of abatement by not depositing the duty for non working days ?"
5. Brief facts of the case are, that respondent-assessee is a registered dealer and is paying duty on manufacture of Pan Masala containing tobacco (Gutkha) under the Central Excise Tariff Act, 1985. Respondent-assessee on 13.9.2012 intimated the Department intending to start commercial production w.e.f. 12.9.2012 and requested for unsealing of 11 machines to manufacture Gutkha. 7 machines for manufacture of Gutkha of MRP Rs.2.00 and on 4 machines for manufacture of Gutkha of MRP Rs.1.50.
6. In the month of September, 2012, assessee intimated the Department that it will stop production/clearance w.e.f. 6.10.2012 and the Department pursuant thereto sealed the machines in the midnight of 5.10.2012.
7. On 5.10.2012, assessee paid central excise duty of Rs.3,68,000/- for the month of October, 2012 as there were 11 machines installed in the factory
8. Since production was closed for 26 days in the month of October, assessee applied for abatement of Rs.3,08,64,516/- which was granted by the Assistant Commissioner on 29.11.2012, who allowed the said amount to be adjusted while discharging duty for subsequent month.
9. The assessee on 12.11.2012 informed the Assistant Commissioner intending to start production of Gutkha of MRP Rs.1.00 on 6 machines and Gutkha of MRP Rs.2.00 on 5 pouches packing machine from 19.11.2012. On 16.11.2013, the Assistant Commissioner directed Superintendent, Central Excise to unseal and install the 11 machines in the midnight of 18.11.2012. The assessee started manufacture of pouches of Gutkha of MRP Rs.1.00 and MRP Rs.2.00 from 19.11.2012. The assessee calculated that he was liable to pay excise duty of Rs.1,17,60,000/- on pro-rata basis for 12 days, i.e., from 19.11.2012 to 31.11.2012 (duty of Rs.45,60,000/- and Rs.72,00,000/-) on Gutkha MRP Rs.1.00 and MRP Rs.2.00 respectively.
10. After adjusting Rs.1,17,60,000/- from abatement of Rs.3,08,64,516/-, sanctioned earlier on 29.11.2012, an amount of Rs.1,91,04,516/- remained from the abated amount. The assessee informed the Department of the payment by way of adjustment on 6.12.2012 by submitting Form-2.
11. The Department was of the opinion that assessee started manufacturing Gutkha on new retail price, i.e., MRP of Rs.1.00 during November, 2012, hence, duty on the same was payable on pro-rata basis, but, since Gutkha of MRP Rs.2.00 was not a new retail price, hence duty on the same was payable for the entire month and not for a period of 12 days provided under Rule 10 of the Pan Masala Packing Machines (Capacity Determination and Collection of Duty), Rules, 2008 (hereinafter called as "PMPM Rules, 2008"). The Superintendent, Central Excise through letters dated 4.3.2013 and 12.3.2013 required the assessee to deposit the central excise duty of Rs.1,08,00,000/-. The said letters were replied by assessee, but a show cause notice was issued on 25.9.2013 proposing for recovery of excise duty of Rs.1,08,00,000/- along with interest and penalty. The said show cause notice was adjudicated by Commissioner vide order dated 29.9.2014 confirming the proposed duty along with interest and equal amount of penalty under Rule 17 of PMPM Rules, 2008 read with Section 11AC of the Central Excise Act. Further, penalty of Rs.5000/- was imposed under Rule 27 of the Central Excise Rules, 2002 for contravening Rule 12 of the Central Excise Rules, 2002 read with Rules 7 and 9 of the PMPM Rules, 2008.
12. Aggrieved by the said order, assessee filed an appeal No.E/50211/2015(DB), and against the order dated 30.9.2014 passed by the Commissioner of Central Excise and Service Tax, Kanpur, Appeal No.E/50222/2015/EX(DB) before CESTAT. On 7.6.2016, CESTAT while deciding the Appeal No.E/50211/ 2015(DB) set aside the order passed by Commissioner Central Excise and Service Tax holding it to be bad and against the provisions of Section 3-A of the Act read with Rules, 7, 8, 9 and 10 of the PMPM Rules, 2008. Similarly, on 10.8.2016 the other appeal of the assessee was also allowed and the order of the Commissioner Central Excise and Service Tax was set aside.
13. Sri Parv Agarwal, learned counsel appearing for the Department, submitted that assessee on 12.11.2012 had submitted a letter declaring that w.e.f. 19.11.2012 the assessee is going to start production of notified goods, i.e., Gutkha of MRP Rs.1.00 with the aid of 6 pouches packing machine and Gutkha of MRP Rs.2.00 with the aid of 5 pouches of packing machine. It is submitted that assessee is neither a new manufacturer nor has changed the retail price of 5 machines, which were used for manufacture of Gutkha of MRP Rs.2.00 during the month of November, 2012. Thus, as per proviso 4 of Rule 9 of the PMPM Rules, 2008 applicable for computation of excise duty is liable for the relevant month. He further submitted that the assessee was required to pay excise duty on pro-rata basis for 12 days on 6 pouches packing machines of MRP Rs.1.00 that remained operative during the said period, which comes to Rs.45,60,000/- @ Rs.19,00,000/- per machine, per month and the same was to be paid by 5th day of the following month (i.e. 5th December, 2012), as the pouches of MRP Rs.1.00 was new retail price of the assessee. Further, the assessee was required to pay full excise duty on 5 machines, which were used for manufacture of Gutkha of MRP Rs.2.00, which works out to Rs.1,80,00,000/- @ Rs.36,00,000/- per machine, per month and this was to be paid by 5th day of the same month as the MRP Rs.2.00 was not a new retail price for the party. According to him total excise duty liability for the month of November, 2012 was Rs.2,25,60,000/- but the assessee had paid only Rs.1,17,60,000/- and there was a short fall of Rs.1,08,00,000/-.
14. Learned counsel for the Department further submitted that Rule 10 of PMPM Rules,2008 provides for abatement in the case of non-production of notified goods and abatement is subject to condition stipulated therein and the assessee cannot on his own calculate the excise duty and set off the same against the duty payable under Rule 9 of the PMPM Rules, 2008.
15. Sri Agarwal submitted, that settled principle of law is that once the statute requires to pay tax within stipulated period then such payment is to be made within that period, otherwise it would render the provision redundant and nugatory.
16. Replying the averments made by counsel for the Department, Sri Nishant Mishra, learned counsel appearing for the respondent-assessee submitted that sub-section 3 of Section 3-A of the Central Excise Act provides that if a factory producing notified goods did not produce the same during any continuous period of 15 days or more, duty calculated on proportionate basis shall be abated in respect of such period, subject to conditions as may be prescribed.
17. Rule 10 of the PMPM Rules, 2008 provides condition for abatement, i.e. if a manufacturer files intimation with the Deputy/Assistant Commissioner with a copy to Superintendent at least three working days prior to commencement of such period. According to him, in the present case, conditions prescribed under Rule 10 were complied and assessee had intimated the Assistant Commissioner on 25.9.2012 regarding stoppage of production from 6.10.2012 and again by letter dated 12.11.2012 regarding starting of production from 19.11.2012.
18. Sri Mishra submitted that intimation as required under Rule 10 was given by the assessee. Thus, he was entitled to abatement in terms of Rule 10 of the PMPM Rules, 2008 in respect of Gutkha of MRP Rs.2.00. He further submitted that provision to Rule 9 cannot be interpreted in a manner so as to levy duty in circumstances, specifically barred by the parent statute, i.e., proviso to Section 3A of the Act.
19. Sri Nishant Mishra, relied upon a judgment of the Gujrat High Court in the case of Commissioner vs. Thakkar tobacco Products Pvt. Ltd. 2016 (332)E.L.T. 785 (Gujarat) wherein the same issued was under consideration and was decided in favour of the assessee. Relevant paragraph nos.12, 13, 14 and 15 of the said judgment are extracted hereunder:-
"12. In the above backdrop, the merits of the impugned order may be examined. The Tribunal, in the impugned order, has recorded that in none of the orders impugned before it, it is in dispute that there was a closure of the factory for more than fifteen days and the required procedure of due intimation of closure, sealing and due intimation or reopening was followed. Thus, there was no dispute that the requirements of rule 10 of the PMPM Rules had been fulfilled. There was also no dispute that the amount adjusted was not more than the amount of duty mandated to be abated in terms of rule 10 of the PMPM Rules. The Tribunal has taken note of the fact that rule 10 of the PMPM Rules does not make any stipulation about abatement having to be claimed by filing an application, though it also does not imply to the contrary. Referring to rule 9 of the PMPM Rules, it was observed that when the intention of the Government is that the amount is to be refunded and an express provision is provided therefor, whereas rule 10 does not make any such provision. It may be noted that insofar as rule 96ZO of the Central Excise Rules is concerned, sub-rule (2) thereof expressly provides for claim of abatement being made under sub-section (3) of section 3A of the Act, which would be allowed by an order passed by the Commissioner of Central Excise of such amount as may be specified in such order. Similarly, sub-rule (7) of rule 96ZQ provides for abatement being allowed by an order passed by the Commissioner of Central Excise of such amount as may be specified in such order, subject to the conditions enumerated thereunder. Similarly, sub-rule (2) of rule 96ZP provides for abatement being allowed by an order passed by a Commissioner of Central Excise of such amount as may be specified in such order subject to the fulfillment of the conditions laid down thereunder. Thus, in relation to independent processors of textile fabrics, manufacturers of non-alloy steel hot re-rolled products and manufacturers of non-alloy steel ingots, who were also assessed on the basis of annual production capacity under section 3A of the Act, there was an express provision for making an order of abatement whereas the PMPM Rules are totally silent in that regard. There is no provision for making an order of abatement under rule 10 of the PMPM Rules.
13. As noticed earlier, rule 10 of the PMPM Rules provides for abatement of duty calculated on proportionate basis in case where the factory does not produce notified goods during any continuous period of fifteen days or more. However, such abatement is subject to the conditions stipulated thereunder as referred to hereinabove. Once such conditions are satisfied, the assessee becomes entitled to abatement of duty to the extent of the days the factory did not produce the notified goods.
14. On a plain reading of rule 10 of the PMPM Rules, it is apparent that while the same provides that duty calculated on a proportionate basis shall be abated, it does not provide for any procedure for doing so. Thus, whereas rules 96ZQ, 96ZO and 96ZP of the Central Excise Rules, 1944, which also are schemes under the compounded levy scheme, there were express provisions for making an order of abatement by the Commissioner, rule 10 of the PMPM Rules is wholly silent in that regard. Under the circumstances, having regard to the fact that rules 96ZQ, 96ZP and 96ZO provided for making an order of abatement, however, there is no corresponding provision in the PMPM Rules, it can be inferred that the rule making authority has consciously omitted making such provision. Therefore, in the absence of any specific provision for making an order of abatement, it cannot be said that the action of the assessee in calculating the duty on a proportionate basis and setting off the same against the duty payable in the succeeding month is, in any manner, violative of the rules or the statutory scheme.
15. Besides, in the light of the findings recorded by the Tribunal to the effect that it is not disputed that the adjustments made were not more than the amounts of duties mandated to be abated as per rule 10 of the PMPM Rules, the action of the respondent assessee in computing the proportionate amount of duty towards the abatement and setting it off against the duty payable in the next month does not adversely affect the revenue in any manner. The abatement, in the opinion of this court, is not akin to refund and means reduction or diminution of the duty. Therefore, when the duty stands reduced to the extent provided in the rule, there is no liability to pay the same, inasmuch as, to that extent the duty stands abated. Therefore, if the assessee has correctly calculated the proportion of duty and set off the same against the duty payable for the next month, it cannot be said that the said action is contrary to the statutory scheme. When the rules do not provide for the manner in which duty is required to be abated, nor do they provide that abatement shall be by an order of the Commissioner or any authority, but nonetheless provide for abatement of duty and the extent of entitlement to such abatement, no fault can be found in the approach of the assessee in suo motu taking the benefit of such abatement."
20. Sri Mishra also placed reliance upon circular issued by the Ministry of Finance (Department of Revenue) Central Board and Excise & Customs, New Delhi dated 16.2.2016 wherein the Department has accepted the judgment of the High Court of Gujarat in case of M/s Thakkar Tobacco (supra). Relevant portion of the circular No.1063/2/2018-CX dated 16.2.2018 is extracted hereunder:
"7.1 Department has accepted the aforementioned order of the Hon'ble High Court of Gujarat where the Hon'ble Court dismissed the departmental appeal on the question of law, whether manufacturer has the option of suo-moto abatement of duty in the event of closure of factory for a continuous period of 15 days or more without first depositing the duty in terms of rule 10 of Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008, on the following grounds,
a) As per provisions of the Central Excise Act, 1944 and the PMPM Rules abatement is to be granted and the statute does not prescribe any order of abatement to be passed by the any authority such as DC/AC.
b) In the erstwhile Central Excise Rules, 1944, there was an express provision which provides for claim of abatement would be allowed by an order passed by the Commissioner of Central Excise. When the intention of the government is that amount is to be refunded in as specific manner, then an express provision is provided. However the impugned rule does not make any such provision.
c) The Board Instruction from F.No.267/16/2009-CX-8 dated 12.03.2009 is not applicable in the present case as Rule of PMPM rules does not speak of any order of abatement."
21. We have heard learned counsel for the parties and perused the materials on record.
22. The sole issue under consideration is as to giving benefit of abatement for non-production, whether the assessee could on their own calculate excise duty and set off the same against the duty payable in the next month. The argument of the Department relying upon Rule 9 of the PMPM Rules, 2008 claiming that the monthly duty on notified goods is to be paid by 5th day of the month and the assessee cannot simpliciter claim set off without first depositing the same had been repelled by the Gujarat High Court in the case of Thakker Tobacco (supra) holding that Rule 10 of the PMPM Rules, 2008 envisages a situation and provides for abatement of excise duty calculated on proportionate basis, in case where factory does not produces notified goods during continuous period of 15 days or more.
23. Moreover, the statue, that is proviso to Sub-section (2) of Section 3A itself provides for abatement where a factory producing notified goods did not produce the same during any continuous period of 15 days or more, the duty calculated on the proportionate basis shall be abated in respect of such period, if the manufacturer of such goods fulfills such condition as may be prescribed. In the present case as the assessee having complied the statutory requirement, is entitled to the benefit claimed by him.
24. The judgment in case of Thakker Tobacco (supra) having been accepted by the C.B.D.T. in its circular dated 16.2.2018, the controversy does not remain any longer as the matter is not res integra any more.
25. In view of the above, we are of the considered opinion that once the Department has accepted the judgment in case of Thakker Tobacco (supra) and has issued circular holding that assessee is entitled to abatement of duty, in the event of closure of factory for continuous period of 15 days or more, without first depositing the duty in terms of Rule 10 of PMPM Rules, 2008, the appeal of the revenue has no force and is hereby dismissed.
26. The question of law are, therefore, answered in favour of the assessee and against the revenue.
Order Date :- 23.10.2019
AKJ