Custom, Excise & Service Tax Tribunal
M/S. Trimurti Fragrance (P) Ltd vs C.C.E.& S.T. Kanpur on 18 March, 2015
IN THE CUSTOMS, EXCISE AND SERVICE TAX
APPELLATE TRIBUNAL, NEW DELHI
PRINCIPAL BENCH, COURT NO. III
Excise Appeal No. E/59856/2013 -Ex[DB]
[Arising out of Order-In-Original No. KNP-EXCUS-000-COM-008-13-14 dated: 31.07.2013 passed by Commissioner of Central Excise Kanpur]
For approval and signature:
Hon'ble Mr. Rakesh Kumar, Member (Technical)
Hon'ble Mr. S.K. Mohanty, Member (Judicial)
1
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2
Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3
Whether Their Lordships wish to see the fair copy of the Order?
4
Whether Order is to be circulated to the Departmental authorities?
M/s. Trimurti Fragrance (P) Ltd. ...Appellant
Vs.
C.C.E.& S.T. Kanpur Respondent
Appearance:
Ms. Seema Jain, Advocate for the Appellants Mr. Pramod Kumar, DR for the Respondent CORAM:
Hon'ble Mr. Rakesh Kumar, Member (Technical) Hon'ble Mr. S.K. Mohanty, Member (Judicial) Date of Hearing.13.02.2015 Date of Decision. 18.03.2015 FINAL ORDER NO. 50719 /2015-Ex(Br) Per Rakesh Kumar (for the Bench):
The facts leading to fulfilling of this appeal are, in brief, as under:-
1.1 The appellant is a manufacturer of Pan Masala containing Tobaco, Called Gutkha chargeable to central excise duty under sub heading 24039990 of the central excise tariff. They were manufacturing the Gutkha in retail pouches of the MRP of Rs. One under brand name Shikhar 1000 and Shikhar and of MRP of 50 Paisa under brand Harpal. The appellant were discharging duty liability under Pan Masala Packing machines (capacity determination and collection of duty) Rules 2008 (hereinafter referred to a PMPM Rules) as per the rates prescribed under notification no. 42/08-CE dated 01.07.2008 issued under sub section of (3) section 3A of the Central Excise Act, 1944. The dispute in this case is for the months of June 2009, July 2009, August 2009, October 2009 and November 2009. The appellant in respect of these months, in terms of the declaration filed by them in form-I under Rule 6 of the PMPM Rules had operated 49 machines, 47 machines, 47 machines, 61 machines and 51 machines respectively, all for manufacture of the Gutkha at MRP of Rs. One per Pouch. However, on scrutiny of their returns, it was found that during these months they had also manufactured cleared the Gutkha of MRP of 50 Paisa per pouch also and during each of these months, they had paid duty on the Gutkha pouches cleared by them at the per month per machines rate applicable for the MRP of Rs. One.
1.2. Rule 8 of the PMPM Rules provides that:-
(a) In case of addition or installation or removal or un-installation of a packing machine in the factory during a month, the number of operating packing machines for the month shall be taken as the maximum number of packing machines installed on any day during the month; and
(b) In a case where manufacturer commences manufacturing of the goods of a new RSP during month on an existing machine, it shall be deemed to be an addition in the number of operating packing machine for the month.
1.3 In the present case during each of the five months to which this dispute pertain, there was no addition of new machines by installation of new machines or reduction in the number of packing machines by un-installation of packing machines. The Department however, invoking first proviso to Rule 8 of the PMPM Rules has taken stand that since during each of these months, the appellant have used the machines installed for the manufacture of the pouches of MRP of 50 Paisa also in addition to the pouches of MRP of Rs. One, it would be treated as addition of new machine and hence for the months of June 2009, July 2009, August 2009, October 2009 and November 2009, the appellant would be required to pay duty on 49 machines, 47 machines 47 machines, 61 machines and 57 machines respectively at the rate applicable for the MRP of 50 Paisa per pouch, in addition to the duty already paid by them in respect of the same number of machines at the rate applicable for the MRP of Rs. One. Since the rate per machine per month as specified in notification no. 42/08-CE is the same for the MRP of Rs. One per pouch and 50 Paisa per pouch, the appellant have been asked to pay the additional duty of the same amount as the amount of duty which they had earlier paid. For this purpose, the Department has presumed that each of the machine installed in the appellants factory during months of June 2009, July 2009, August 2009, October 2009 and November 2009 had been used for manufacture of Gutkha pouches of the MRP of Rs. One as well as 50 Paisa. It is on this basis that Show Cause Notice dated 30.06.2010 was issued to the appellant for
(a) Recovery of duty amounting to Rs. 31,87,50,000/- from the appellant company in respect of the months of July, August, October and November along with interest thereon under section 11AB; and
(b) imposition of penalty on them under Rule 17 of the PMPM Rules read with Rule 25 of the Central Excise Rules, 2002.
1.4 The above SCN was adjudicated by Commissioner Central Excise Kanpur Vide order in original dated 31.07.2013 by which the above mentioned duty demand was confirmed against the appellant along with interest thereon under section 11AB and beside this, penalty of equal amount was imposed on them under Rule 17 of the PMPM Rules 2008 read with Rule 25 of the Central Excise Rules 2002. Against this order of the Commissioner this appeal has been filed.
2. Heard both the sides.
3. Ms. Seema Jain, Advocate, the ld. Counsel for the appellant made the following submissions:-
(1) Out of duty demand of Rs.31,87,50,000/-, the duty demand of Rs.6,37,50,000/- is for the Month of November, 2009. This duty demand is not sustainable as during the month of November, 2009, the appellant company did not manufacture any Gutkha pouches of the RSP of 50 Paise and during this month only the stock of 50 paise. Gutkha pouches manufactured during previous months were cleared. Therefore, proviso to Rule 8 of PMPM Rules would not be applicable for November, 2009 as this proviso applies only for manufacture and not for in respect of clearance.
(2) During June, 2009, July, 2009, August, 2009 and October, 2009, the appellant manufactured Gutkha of RSP of 50 Paise per pouch which had not been declared by them in their declarations for these months. In this situation, Sixth Proviso to Rule 9 of PMPM Rules would apply and accordingly, the appellant company would have to pay duty at the rate applicable to the goods of the higher RSP so manufactured by them in respect of all the packing machines operative for the period during which the manufacture took place. Since the appellant had already paid duty on the higher RSP of Rs.1 in respect of all machines, they are not liable to pay any further duty.
(3) First proviso to Rule 8 of the PMPM Rules becomes applicable when during a particular month, on the same machine the Gutkha of a new retail sale price is manufactured. The expression new retail sale price used in first proviso to Rule 8 must be understood in the same sense in which it is understood in the context of Rule 5. Rule 5 specifies the deemed production of Gutkha pouches per operating machine per month according to the various retail sale price (RSP) slabs - upto Rs.1, from Rupee 1.01 to Rupee 1.50, from Rs. 1.51 to Rs.2 and above Rs.6. When for the purpose of determining deemed production per operating machine per month, all the RSPs of upto Rs.1, are treated as one RSP, for the purpose of Rule 8 the RSPs of the same RSP slabs as specified in Rule 5 cannot be treated as different RSPs. Therefore, the RSP of 50 paise per pouch is not a new RSP when earlier, the machines were being used for the manufacture of the pouches of RSP of rupee one per pouch.
(4) Even if the first proviso to Rule 8 is applicable to the appellant company, the quantity of Gutkha of MRP 50 Paise manufactured in the months of June 2009 and July 2009, is less than the deemed production of two machines as per Rule 5 and the quantity of gutka of RSP of 50 paise produced in the months of August and October is less than the deemed production of one machine as per Rule 5. However, duty has been demanded on all the installed machines- 49 machines in June, 2009, 47 machines in July 2009, 47 machines in August, 2009 and 61 machines in October, 2009 implying that the appellant manufactured Gutkha of RSP of Rs.1 as well as Rs.0.50 on all the installed machines. This is not and cannot be the case, as the machines manufacturing the Gutkha of RSP of Rs. 1 and Rs.0.50 are fitted with different component which disperse different quantities of Gutkha in sachets and seal the pouches at different distances. The demand in terms of first proviso to Rule 8, if any, would be restricted only to 2 machines in June 2009 and July 2009 and to one machine each in August, 2009 and October, 2009.
(5) Penalty is not imposable, as penalty under Rule 17 of PMPM Rules is subject to the provisions of section 11AC of the Central Excise Act and therefore, the element of mensrea is mandatory. The appellant had no intention to evade the duty as there was no suppression of any fact from the department and the demand show cause notice has been issued on the basis of the declarations made in E.R.- 1 Returns filed by the appellant.
4. Shri Pramod Kumar, the ld JCDR, defended the impugned order by reiterating the findings of the Commissioner and pleaded that if during a particular month, the Gutkha of pouches of a new RSP are manufactured, this has to be treated as an addition of the machine in terms of 1st provision to Rule 8 of PMPM Rules and that this proviso would be applicable, even if, the new RSP is of the same RSP slab. He, therefore, pleaded that there is no infirmity in the impugned order.
5. We have considered the submissions from both the sides and perused the records. The appellant during the month of June 2009 July 2009 August, 2009 October, 2009 and November, 2009 had as per the declarations filed by them in respect of these months under Rule 6 of the PMPM Rules had operated 49 machines, 47 machines, 47 machines 61 machines and 51 machines respectively and on each of these machines they were to manufacture the Gutkha pouches of RSP of Rs.1. ER-I Returns for these months they also showed manufacture and clearances of the Gutkha of RSP of Rs.0.50 pc. On this basis department has inferred that during each of these months, the appellant have used each of the installed machines for manufacture of the Gutkha of RSP of Rs.1 as well as RSP of Rs.0.50 and it is on this basis that the first proviso to Rule 8 of the PMPM Rules have been invoked, according to which, when a manufacturer commences manufacturing of the goods of a new retail sale price (RSP) during a month on an existing machine, it shall be deemed to be an addition in the number of operating packing machine for the month. The basic point of dispute in this case is as to what is the new retail sale price. According to the appellant, a new retail sale price is the retail sale price which belongs to a mew RSP slab i.e. the RSP slab, after than the RSP slab to which existing retail sale price belongs. Thus, according to the appellant if a manufacturer is manufacturing the Gutkha of the RSP of Rs.1, the RSP of Rs.0.50 Pc. cannot be treated as new RSP, as in terms of Rule 5, the deemed production per operating packing machine per month for RSP upto Rs.1 is 37,44,000/- and the RSP of Rs.1/- and Rs.o.50/- belong to the same RSP slab. Accordingly, the appellants contention is that the new retail sale price for invoking first proviso to Rule 8 is that RSP which belongs to a different RSP slab. On the other hand, the departments contention is that the new RSP means a RSP different from the existing RSP irrespective of whether the existing RSP and the new RSP belong to the same RSP slabs mentioned in Rule 5.
6. In terms of section 3 of the Central Excise Act 1944, the Central Excise duty is leviable on all the excisable goods excluding the goods produced or manufactured in a special economic zone, which are produced or manufactured in India and at the rates specified in first schedule to the Central Excise Tariff Act. However, under section 3 A (1) of the Act the Central Govt. has power to notify certain goods, having regard to the nature of the process of their manufacture or production, the extent of evasion of duty in respect of such goods and the necessity to safeguard the interests of the Revenue for levy and collection of excise duty on such goods based on the annual capacity of production of the factory in which such goods are manufactured which shall be deemed to be the annual production of such goods by such factory or based on the quantity which is deemed to have been produced based on a relevant factor as specified by the Govt. In exercise of powers under section 3 A (1) of Central Excise Act, 1944 the Central Government has notified the pan masala and also pan masala containing tobacco (Gutkha) packed in retail packs for levy of duty under section 3A and, accordingly, under Notification No.30/08-CE (NT) dated 01.07.08 has framed PMPM Rules. Rule 4 of the PMPM Rules states that the relevant factor to the production of the notified goods shall be the packing machines in the factory of the manufacture. Rule 5 of the PMPM Rules specifies the deemed production of pouches per operating machines per month for different retail sale prices. The deemed production per operating machines per month specified in Rule 5 is in respect of different RSP slabs upto Rs.1, from Rs.1.01 to Rs.1.50, from Rs.1.51 to Rs.2, from Rs.2.01 to Rs.3, from Rs. 3.01 to Rs.4, from Rs.4.01 to Rs.5, from Rs.5.01 to Rs.6 and above Rs.6. Rule 5 also provides that if the machines are multiple track or multiple line packing machines, each track or line shall be treated as one machine unless the packing machines besides packing the notified goods in pouches also perform additional process involving moulding and giving a definite shape to such pouches with a view to distinguish the brand or to prevent the counterfeiting of the goods. Thus, when the single line/single track packing machines manufactures Gutkha pouches of RSP upto Rs.1, its deemed production would be 37,44,000/- and similarly, if a machine manufactures Gutkha pouches of RSP from Rs.1.51 to Rs.2 its deemed production would be 35,56,800/-. Thus, if a single track machine in a month had manufactured Gutkha pouches of RSP of Rs.0.25, Rs0.50 piece and Rs.1 its deemed production would be 37,44,000/-. Notification No.42/2008-CE dated 01.07.2008 specifies the duty payable per operating machine per month based on the various RSP slabs, as specified in Rule 5. The duty payable specified in the notification is the total duty payable under section 3 of the Central Excise Act, 1944, Additional excise duty leviable under section 85 of the Finance Act, 2005, National Calamity Contingent Duty leviable under section 136 of the Finance Act, 2001, Education CESS leviable under Section 91 of the Finance Act, 2004 and Secondary and Higher Education CESS leviable under section 136 of the Finance Act, 2007. In terms of Rule 7 of the PMPM Rules, the duty payable shall be calculated by the application of the appropriate rate of duty specified in the Notification No.42/2008-CE dated 01.07.2008 to the number of operating packing machines in the factory during the month. The Rule 8 of the PMPM Rules states that in case during a particular month, there is addition or decrease in the number of operating packing machines the maximum number of packing machines installed on any day during the month shall be treated as the number of operating packing machines during the month. However, the first proviso to Rule 8 states that in case a manufacturer commences his manufacturing of a new RSP during the month on an existing machine, it shall be deemed to be an addition in the number of operating packing machine for the month. The question as to what is a new retail sale price.
8.1 In our view the expression new retail sale price has to be understood in the sense in which it is understood in Rule 5. Rule 5 of the PMPM Rules, as explained above, specifies the deemed production per operating machine per month and this deemed production is specified for different RSP slabs. The rate of duty per machine per month specified in Notification No.42/2008-CE is on this deemed production only. Therefore, first proviso to Rue 8 cannot be interpreted so as to result in levy of duty on deemed production which is more than the deemed production as specified in Rue 5. In terms of Rule 5 so long as a particular single track packing machine in a particular month manufactures Gutkha pouches of RSP upto Rs.1 its deemed production would be 37,44,000/-. Thus, even if the machine manufactures in a month the Gutkha pouches of the 25 Paisa, 50 Paisa, 75 Paisa and Rs.1, its deemed production would be Rs.37,47,000/- and not Rs.37,44,000/- multiplied by 4. Thus, for the purpose of Rule 5 all the RSPs within a particular RSP slab are the same for the purpose of determining deemed production per month, and it is only an RSP which is different from a particular RSP slab which has to be treated as a new RSP as it would result in change of the deemed production. In our view, the term new retail sale price used to First Proviso to Rule 8 has to be understood in the same sense in which it is understood in rule5 and, therefore, the RSP of 0.50 piece cannot be treated as a new RSP, as it belongs to the same slab to which the RSP of Rs.1 belongs. The First Proviso to Rule 8 cannot be given an interpretation which results in levy of duty on the quantity which is more than the quantity of Gutkha/Pan masala pouches deemed to have been manufactured per machine per month as specified in Rue 5.
9. It is also seen that in terms of Sixth Proviso to Rule 9 of the PMPM Rules, in case it is found that a manufacturer has manufactured goods of the RSPs which have not been declared by him in accordance with the provisions of these Rules, the duty at the rate applicable to the goods of the highest RSP, so manufacture by him, shall be payable by him in respect of all the packing machines operated by him for the period during which such manufacturing took place. Thus, in terms of this Rule when the appellant in the declarations filed by him for the months of June 2009 July 2009 August, 2009 October, 2009 and November, 2009 had declared the manufacture of Gutkha of RSP of Rs.1 and if it is held that during each of these months he had also manufactured Gutkha pouches of RSP of 50 Piece also on each of these machines, in accordance with this proviso, he will be liable to pay duty on all the machines at the rate applicable for RSP of Rs.1. , and in this case there is no dispute that the appellant has paid duty at the rate applicable for the RSP of Rs.1. Thus in terms of Sixth proviso to Rule 9, there would be no duty liability. The duty liability would have arisen if against the declared RSP of Rs.1 the appellant had also used the machines for manufacture of the Gutkha pouches of RSP of Rs.3, but this is not the case here.
10. It is also seen that by section 101 of the Finance Act, 2014, the First Proviso to Rule 8 of the PMPM Rules has been replaced w.e.f. 13th April 2010 by the following:-
Provided that where a manufacturer uses an operating machine to produce pouches of different retail sale price during a month, he shall be liable to pay the duty applicable to the pouches of the highest the retail sale price for the whole month.
10.1. Thus, in terms of this retrospective amendment effective from 13th April, 2010, made by section101 of the Finance Act, 2014, when a manufacturer in a particular month manufacturers Gutkha of different RSPs on the same machines, his duty liability in respect of that machine would be at the rate applicable to the highest RSP. In our view, this retrospective amendemnt is in accordance with the 6th proviso to Rule 9 and also in accordance with the provisions of Rule 5 and this retrospective amendment to Rule 8 of PMPM Rules, shows that it was not the intention of the Government that in a case where in a month a particular machine is used to produce Gutkha pouches of more than one RSP, each RSP is to be treated as separate machine for the purpose of charging duty, but the intention was to charge duty inasmuch as situation at the rate applicable to the highest RSP. For this reason also, there is no reason for interpreting the first proviso to Rule 8 during the period prior to 13.04.2010 in a manner which would result in levy of duty on the quantity which is more than the deemed production per machine per month as specified in rule 5 as the retrospective amendment to Rule 8 of the PMPM Rules w.e.f. 13.04.2010 shows that the intention of the Government was to levy duty at the rate applicable to highest RSP on a machine during a particular month when during that month, on that machine, pouches of different RSPs had been produced. Moreover, it is well settled principle of the interpretation of the statute that different provisions of a statute must be construed harmoniously and, therefore, in this case, 1st proviso to Rule 8 of the PMPM Rules cannot be interprested so as to result in levy of duty on the quantity which is more than the deemed production per machine per month as specified in Rule 5. When for the purpose of rule 5, in case of a packing machine manufacturing Gutkha pouches of RSP of Rs.1, the RSP of Rs.0.50 piece is not a new RSP, for the purpose of First Proviso to Rule 8, it cannot be treated as new RSP.
11. In view of the above discussion, the impugned order is not correct. The same is set aside. The appeal is allowed.
[Pronounced in the open Court on 18/03/2015] (S.K. Mohanty) (Rakesh Kumar) Member(Judicial) Member (Technical) Neha Page | 1