Custom, Excise & Service Tax Tribunal
M/S Dhariwal Industries Ltd vs Commissioner, Central Excise & Service ... on 13 August, 2015
In The Customs, Excise & Service Tax Appellate Tribunal West Zonal Bench At Ahmedabad Appeal No.E/13617/2013-DB [Arising out of OIA No.PJ/265/VDR-I/2012-13, dt.08.08.2013, passed by Commissioner (Appeals), Central Excise & Customs, Vadodara] M/s Dhariwal Industries Ltd. Appellant Vs Commissioner, Central Excise & Service Tax, Vadodara-I Respondent
Represented by:
For Appellant: Shri S.N. Kantawala, Advocate For Respondent: Dr. J. Nagori, Authorised Representative For approval and signature:
Honble Mr. P.K. Das, Member (Judicial) Honble Mr. P.M. Saleem, Member (Technical)
1. Whether Press Reporters may be allowed to see the No Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the Yes CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3. Whether their Lordships wish to see the fair copy of Seen the order?
4. Whether order is to be circulated to the Departmental Yes authorities?
CORAM:
HONBLE MR. P.K DAS, MEMBER (JUDICIAL) HONBLE MR. P.M. SALEEM, MEMBER (TECHNICAL) Date of Hearing: 16.07.2015 Date of Decision: 13.08.2015 Order No. A/11210/2015 Dated 13.08.2015 Per: P.K. Das The relevant facts of the case, in brief, are that the Appellants were engaged in the manufacture of Gutkha and Pan Masala, classifiable under Chapter Heading No.24039990 and 21069020 respectively of the Schedule to Central Excise Tariff Act, 1985. These items were covered under Compounded Levy Scheme as notified goods by Notification No.29/2008-CE(NT), dt.01.07.2008 issued under Section 3A of Central Excise Act, 1944, and the procedure was framed under Pan Masala (Packing Machine Capacity Determination & Collection of Duty) Rules, 2008 (in short Rules, 2008). They were discharging duty liability as per determination of annual capacity of production under Rules 2008. By judgment dt.07.12.2010, the Honble Supreme Court ordered a complete ban on use of plastic pouches in packing of tobacco, gutkha etc w.e.f. 01.03.2011. The Appellant discharged the duty liability for the month of February 2011 within the stipulated period as per Rules 2008. It came to their knowledge that the Ministry of Environment & Forest, Govt. of India, issued the Notification S.O.S. No.249 (E) dt.04.02.2011 banned use of plastic pouches in packaging of Pan Masala and Gutkha with immediate effect. The Appellant was unable to continue their production and therefore, by letter dt.08.02.2011, they informed the jurisdictional Assistant Commissioner, Central Excise & Customs, with a request for sealing their machines as required under Rules 2008 as they closed down their factory. Accordingly, the Superintendent of Central Excise, Vadodara, on 10.02.2011, sealed the machines installed in the Appellants factory. Subsequently, the Honble Supreme Court by order dt.17.02.2011 directed that the notification will be effective from 01.03.2011. Hence, the Appellants re-opened their factory and pursuant to their application for de-sealing of the machines, the machines were de-sealed on 17.02.2011. The Appellants filed a refund claim of duty on 29.06.2011 on pro-rata basis of the duty paid during period of closure of their factory for 6 days.
2. A show cause notice dt.15.05.2012 was issued proposing to reject the refund claim, as it is contrary to Rule 10 of the Rules 2008, insofar as the period qualifying for abatement should be any continuous period of 15 days or more. The Adjudicating authority rejected the refund claim. By the impugned order, Commissioner (Appeals) rejected the appeal filed by the Appellant and upheld the Adjudication order.
3. The learned Advocate on behalf of the Appellant submits that due to notification dt.04.12.2011 of the Ministry of Environment & Forest, the Appellant was compelled to close down their factory and the Superintendent of Central Excise on 10.02.2011 sealed the machines. However, as per the direction of Honble Supreme Court, the factory was re-opened on 17.02.2011 and the jurisdictional Central Excise Officers de-sealed the machinery. Thus, there is no manufacturing operation during the closure period from 10.02.2011 to 16.02.2011 and the Appellants are entitled to get the refund of duty as paid by them on pro-rata basis. He drew the attention of the Bench to various provisions of Rules 2008. He also relied upon the various decisions of Honble Supreme Court, High Court and Tribunal.
4. On the other hand, the learned Authorised Representative on behalf of the Revenue reiterates the findings of the Commissioner (Appeals). He submits that there is no provision under Rules 2008 to refund any duty as paid by the Appellant as per the determination of annual production capacity. He further submits that the Appellants themselves stopped the production and the Ministry of Environment & Forest had not issued any notification to stop the production of the goods. It is further submitted that the main object of the Rules 2008 is to safeguard the interest of Revenue insofar as the Appellants are liable to pay duty during the period, even there was no manufacturing activity, unless it is covered by Rule 10 of the Rules 2008 and claimed the abatement for non-production of goods of continuous period of 15 days or more. In the present case, that the production of the goods was stopped for 6 days and the abatement of duty cannot be granted.
5. After hearing both the sides and on perusal of the records, we find that the Appellants paid duty for the month of February 2011 by the 5th of the same month as per Rule 9 of the Rules 2008. By letter dt.08.02.2011, they informed to their jurisdictional Assistant Commissioner of Central Excise & Customs as under:-
We are engaged in the Manufacture of Pan Masala/Gutkha, for packing of which we used Plastic Pouches. We are working under Compounded Levy Scheme from July 2008.
On 17.12.2010, Honble Supreme Court had ordered a Ban on the use of Plastic Pouches in the Packaging of Tobacco, Gutkha & Pan Masala with effect from 01.03.2011. As per these order, we are planning to find the suitable substitute. It is to be effective from 01.03.2011.
The Government of India, Ministry of Environment & Forest has issued a Notification dt.04.02.2011, Banning the use of Plastic for Packaging Gutkha/Pan Masala & other Tobacco Products which comes into immediate effect.
The Notification has enforced the Ban without considering, direction of the Supreme Court Banning Plastics for Packing without considering the difficulties of the manufacturer, with immediate effect.
Before issue of this Notification, the Government should have considered the provisions of Notification No.30/08, dt.01.08.2008 issued by the Finance Ministry.
We have no alternative but to close down the factory and we have stopped packing and production from 07.02.2011. We are giving this intimation of closure of the factory as required under the Rules. It is requested that the 21 packing machines available and working in our Factory on Payment of Duty in advance may be effectively sealed as per the Provisions Pan Masala (Packing Machine Capacity Determination & Collection of Duty) Rules, 2008.
6. It is seen from the show cause notice that the Superintendent of Central Excise incharge of the unit, effectively sealed the machines on 10.02.2011. Honble Supreme Court on 17.02.2011, directed that the said notification of the Ministry of Environment & Forest will be effective from 01.03.2011. Hence, the Appellant re-opened their factory and as per an application on 17.02.2011 of the Appellant, the Superintendent of Central Excise de-sealed the machines. De-sealing of the machines was done at 18.00 hrs on 17.02.2011. Hence, the Appellant filed a refund claim of duty on 29.06.2011 for the period of 6 days as they closed down their factory.
7. According to the Revenue, Rule 10 of Rules 2008 specified the period for qualifying for abatement of duty would be any continuous period of 15 days or more. But, the Appellants factory was continuously closed only for 6 days i.e. 11.02.2011 to 16.02.2011. The period of 6 days during which the Appellants factory was closed will not qualify for refund/abatement. Adjudicating authority rejected the refund claim holding that there is no provision, under Rule 2008 for refund/abatement of duty except Rule 10 of the said Rules. It has been observed that the Appellant was neither forced by an order nor by any notification of the Central Excise Department to close down their factory. The machines were sealed and de-sealed only at the request of the Appellant. By the impugned order, the Commissioner (Appeals) upheld the Adjudication order and observed that the Appellant stopped manufacturing on account of notification of the Ministry of Environment and Forest. In the notification dt.04.02.2011, the use of plastic as packing material for Pan Masala and Gutkha Industries was specifically disallowed. As there was no alternative packing available, the Appellant on receipt of notification, was forced to stop the production from 11.02.2011.
8. Rules 2008 was framed in exercise of powers conferred by sub-section (2) and (3) of Section 3A of Central Excise Act, 1944. It is clear from sub-section (1) of Section 3A of the said Act that legislature introduced the provisions of Section 3A to safeguard the interest of Revenue to the extent of evasion of duty in regard to such notified goods, having regard to the nature of the process of manufacture or production of excisable goods. In terms of Sub-section (2) of Section 3A, the Central Government may issue notification to frame the rules for determination of annual capacity of production of the factory, to specify the factor relevant to the production of such goods, which is deemed to be produced by use of such factor and to provide for determination of the production capacity of the factory, in which such goods are produced on the basis of such factor. Sub-section (3) of Section 3A of the Act is a charging section that the duty of excise on notified goods shall be levied, at such rate, on such factor relevant to the production, as specified by notification issued by the Central Government and collected in such manner as may be prescribed. Proviso to sub-section (3) of Section 3A extended the benefit of abatement of duty in respect of non-production of goods during any continuous period of 15 days or more.
8.1 On perusal of the Rules 2008, it is noted that as per Rule 4, the relevant factor to the production of notified goods, shall be number of packing machines in the factory of the manufacturer. Rule 6 of the said Rules envisages the determination of annual capacity of production, insofar as a manufacturer of notified goods shall declare the number of packing machines available in their factory in detail in the prescribed Form as mentioned therein to the Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, who shall, after making such enquiry as may be necessary including physical verification, approve declaration and determine and pass such order concerning annual capacity of production. Rule 8 of the said Rules provides alteration in number of operating packing machines. Second Proviso to Rule 8 states that in case of non-working of any installed packing machines during the month for any reason whatsoever, the same shall be deemed to be operating packing machines for the month. Duty payable for a particular month, as per Rule 7 of the said Rules, shall be calculated by application of the appropriate rate of duty specified in the notification, to the number of operating packing machines in the factory.
8.2 Rule 9 of Rules 2008 is a machinery provision, manner of payment of duty and interest. The monthly duty shall be paid by the 5th day of the same month and intimation shall be filed to the jurisdictional Superintendent of Central Excise before 10th day of the same month. 4th Proviso to Rule 9 provides 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 re-calculated on pro-rata basis and in case, the amount of duty so re-calculated is less than the duty paid for the month, the balance shall be refunded to the manufacturer by 20th of the following month. Proviso to Sub-section (3) of Section 3A had extended the benefit of abatement of duty, corresponding to Rule 10 of the said Rules 2008. Rule 16 of the said Rules stipulates despite anything contained in these rules, where a manufacturer permanently ceases to work in respect of all the machines installed in the factory and who has filed an intimation for surrender of registration 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, for this purpose, the duty payable by him for the month shall be re-calculated on pro-rata basis and if there is any excess payment, it shall be refunded to a manufacturer by 20th day of the following month. On reading of 4th Proviso to Rule 9 and Rule 16 of Rules 2008, it is clear that there are provisions for refund of excess payment of duty in certain cases and the contention of the learned Authorised Representative for the Revenue that there is no provision for refund of duty, cannot be accepted.
9. There is a distinction between the Rule 10 and Rule 16 of the said Rules. The claim of abatement under Rule 10 will apply, in case, a factory did not produce the notified goods during any continuous period of 15 days or more and followed the procedure as mentioned therein. On the other hand, Rule 16, starts with the words Notwithstanding anything contained in these rules, make it clear that nevertheless all the provisions in Rules 2008 when a manufacturer permanently ceases to work in respect of all the machines installed in the factory and filed an intimation for surrender of registration with the Deputy Commissioner of Central Excise, the monthly duty payable shall be recalculated on pro-rata basis and the excess amount paid by them shall be refunded. The expressions a manufacturer permanently ceases to work in respect of all the machines installed in the factory in Rule 16 have wide amplitude. This should be read with the broad and comprehensive meaning to cover the situation, other than Rule 10 of non-production of goods for temporary period. To sum up, Rule 10 extended abatement in case of non-production of goods for certain period. But, Rule 16 would apply in case, a manufacturer closed down his factory in respect of all the machines installed in the factory.
10. The other aspect is that the use of words operating packing machine in Rules 5, 6(3), 7 and 8 would indicate it that the duty for a particular month shall be payable on the basis of number of packing machines operating in the factory. Second Proviso to Rule 8 stipulates that in case of non-working of any installed packing machine, for any reason whatsoever, the same shall be deemed to be operating packing machine for the month. The benefit under Rule 10 would be extended in case non-working of all operating packing machines for certain period. But, in case a manufacturer cease to work permanently and all the machines were sealed by the Superintendent of Central Excise on the basis of intimation given by them, resulting to none of the packing machines would be operating and the duty if any paid, should be refunded.
11. Honble Supreme Court in the case of Trutuf Safety Glass Industries Ltd Vs Commissioner of Sales Tax 2007 (215) ELT 14 (SC), held as under:-
18.The question? is not what may be supposed and has been intended but what has been said. Statutes should be construed not as theorems of Euclid. Judge Learned Hand said, but words must be construed with some imagination of the purposes which lie behind them. (See Lenigh Valley Coal Co. v. Yensavage, 218 FR 547). The view was re-iterated in Union of India and Ors. v. Filip Tiago De Gama of Vedem Vasco De Gama (AIR 1990 SC 981).
12. The Hon'ble Punjab & Haryana High Court in the case of Godwin Steels Pvt.Ltd. Vs CCE Chandigarh 2010 (254) ELT 202 (P&H), while dealing with Section 3A of the Central Excise Act, 1944 read with Rule 96ZQ(2)of erstwhile Central Excise Rules, 1944, observed that it was wholly unjust for the Department to recover the duty for the whole month of November, during which, the factory had not commenced production. When the factory was not in production, then obviously, it is not liable to pay duty during the period of non-production. The Tribunal in the case of Rajat Industries Pvt.Ltd. Vs CCE Delhi-I 2012 (284) ELT 581 (Tri-Del), while dealing with the present Rules 2008, following the decision of Hon'ble Punjab & Haryana High Court in the case of Godwin Industries Pvt.Ltd. held as under:-
10.?In order to find answer to this question it would be useful to have a look on the relevant provisions of the Central Excise Act, relating to levy and collection of excise duty. Section 3 of the Excise Act is the main charging section which provides that there shall be levied and collected excise duty on excisable goods which are produced or manufactured in India. From this, it is evident that excise duty is an incidence of tax on production or manufactured of the goods. That being the case, it is difficult to sustain the plea that the appellant assessee can be charged excise duty for the period during which his unit had not even commenced the production. The department is seeking to justify the impugned order under Rule 9 of PMPM Rules of 2008 framed under Section 3A of the Central Excise Act. Section 3A confers power on the Central Government to charge excise duty on the basis of capacity of production in respect of notified goods. The basic object of conferring such power on the Central Government is to prevent evasion of excise duty in respect of certain excisable goods with a view to safeguard the interest of revenue. This, does not mean that Section 3A confer power on the Government to frame the rules to charge excise duty for the period prior to the commencement of production. Therefore, in our view the impugned order confirming demand for first three days of May 2009 when the production had not even commenced cannot be sustained. In our aforesaid view, we find strength from the judgment of Punjab & Haryana High Court in the matter of Godwin Steels (P) Ltd wherein while dealing with the similar issue of compounded levy scheme in relation to steel mfg. unit it was held thus :-
3.?After hearing the learned counsel for the parties, we are of the considered opinion that as the petitioners factory started production with effect from 17-11-1997, therefore, it was wholly unjust for the department to recover the duty for the whole month of November, during which, its factory had not commenced production. When the factory of the petitioner was not in production, then obvious, it is not liable to pay the duty during the period of non-production.
13. In the present case, it is revealed from the letter dt.08.02.2011 of the Appellant, as referred above, that the Appellants had given intimation to the Assistant Commissioner of Central Excise that they closed down their factory due to the notification issued by the Ministry of Environment & Forest, Government of India, banning the use of plastic pouches with immediate effect. There is no dispute that the Superintendent of Central Excise was acted upon on the basis of intimation by letter dt.08.02.2011 and sealed the machine on 10.02.2011. Thus, on 10.02.2011, the Appellant closed down their factory. The intimation given by the Appellant to the Assistant Commissioner of Central Excise by letter dt.08.12.2011 would show that the Appellant permanently ceases to work in respect of all the machines installed in the factory and it would be followed for surrender of registration. Incidentally, by order dt.17.02.2011, the Honble Supreme Court directed that the ban will be effective from 01.03.2011. As per the direction of Honble Supreme Court, the Appellant re-opened the factory on 17.02.2011. The jurisdictional Superintendent of Central Excise, de-sealed the machines. In such a peculiar facts and circumstances of the case, in our considered view, the refund claim filed by the Appellant would come within the purview of Rule 16 of Rules 2008.
14. The learned Authorised Representative for the Revenue, during the course of hearing, submitted that the Appellant re-opened the factory on 17.02.2011 and therefore, it can not be treated as permanently ceases to work. They have also not surrendered registration. It is difficult to accept the contention of the learned Authorised Representative for the Revenue, as the Appellant re-opened the factory and therefore, they are not eligible for refund of duty. There is no provision in Rules 2008 that after declaring permanently ceases to work, the manufacturer would not be entitled to re-open his factory. Rule 16 would cover the situation, where a manufacturer filed an intimation to the Deputy Commissioner of Central Excise intimating permanently ceases to work for surrender of registration. There is no bar on re-opening of the factory in Rules 2008, which is a subsequent event. Further, the Appellant in its letter dt.08.02.2011 categorically stated that they were giving intimation of closure of the factory as required under the Rules, would be impliedm surrender of registration. It is already observed that in the present case, taking into account of order of Honble Supreme Court, notification of Ministry of Environment and Forest, and the letter dt.08.02.2011 of the Appellant to close down their factory and further consequence of surrender of registration may not be followed due to subsequent order dt.17.02.2011 of Honble Supreme Court, the Appellant should not be penalized by rejecting the refund claims, for the reason, they had re-opened the factory and such reading of the said provision, would be totally unjust, improper and against all cannons of natural justice and fair play. So, in such peculiar facts and circumstances of the case, we hold that the Appellant is entitled to refund of the duty for closing down of their factory.
15. In view of the above discussion, we find that the impugned order is liable to be set aside. Accordingly, it is set aside. The appeal filed by the Appellant is allowed.
(Pronounced in Court on 13.08.2015)
(P.M. Saleem) (P.K. Das)
Member (Technical) Member (Judicial)
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