Custom, Excise & Service Tax Tribunal
Sanket Food Products (P) Ltd vs Aurangabad on 13 November, 2013
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
APPEAL NO: E/86921/2013
APPLICATION NO: E/Stay-95227/2013
[Arising out of Order-in-Original No: 23/CEX/Commr./2012 dated 24/12/2012 passed by the Commissioner of Central Excise, Customs & Service Tax, Aurangabad.]
For approval and signature:
Honble Shri P.R. Chandrasekharan, Member (Technical)
Honble Shri Anil Choudhary, 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?
:
No
2.
Whether it should be released under Rule 27 of 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?
:
Seen
4.
Whether Order is to be circulated to the Departmental authorities?
:
Yes
Sanket Food Products (P) Ltd
Appellant
Vs
Commissioner of Central Excise & Customs
Aurangabad
Respondent
Appearance:
Shri V. Sridharan, Sr. Advocate with Mr. Kamaljeet Singh, Advocate & Mr. Narendra Dave, Chartered Accountant for the appellant Shri Shobha Ram, Commissioner (A.R.) for the respondent CORAM:
Honble Shri P.R. Chandrasekharan, Member (Technical) Honble Shri Anil Choudhary, Member (Judicial) Date of hearing: 13/11/2013 Date of decision: 11/04/2014 ORDER NO: ____________________________ Per: P.R. Chandrasekharan:
The appeal is directed against Order-in-Original No: 23/CEX/Commr./2012 dated 24/12/2012 passed by the Commissioner of Central Excise, Aurangabad. When the case was called for hearing on 12/08/2013, it was decided that the stay petition and appeal would be heard together and accordingly, the case was listed for hearing on 24/09/2013. On 24/09/2013 the appeal was part-heard and was further adjourned and the hearing was completed on 13/11/2013.
2. The brief facts of the case are as follows:
2.1. The appellant, M/s. Sanket Food Products (P) Ltd., (M/s. Sanket in short) are manufacturers of Pan Masala and pack the same in pouches with the aid of packing machines and the retail sale price of the products are declared on the pouches which bear their brand names. The aforesaid products have been notified under Notification No. 29/2008-CX (NT) dated 01/07/2008 and Central Excise duty is levied on these goods in accordance with the provisions of Section 3A of the Central Excise Act, 1944 on the basis of number of packing machines used and the MRP mentioned on the pouches.
2.2. The Assistant Commissioner of Central Excise, Nanded Division determined the monthly liability of the duty payable by the appellant at Rs. 69 lakhs vide order dated 12/10/2010. The duty so determined was payable in terms of Rule 9 of Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 (the Rules for short).
2.3. The appellant-assessee did not pay the monthly duty of Rs. 69 lakhs in November, 2010 and the said duty of Rs. 69 lakhs was adjusted in April, 2011 against the rebate claim sanctioned vide order dated 20/04/2011 passed by the Dy. Commissioner of Central Excise, Nanded Division. As per Rule 9 of the said Rules, if assessee fails to make the payment of duty in any month and continues to operate any machines then the assessee was required to pay any duty as per the 7th proviso to Rule 9 which provided 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. In the month of April, 2011, the number of machines operated was increased by the assessee from 20 to 50 and vide order No. 4/2011 dated 01/04/2011 the duty liability was fixed at Rs. 6,36,50,000/-. In view of the above, the department was of the view that for the month of November, 2010 to April, 2011 the assesseee was required to pay duty @ Rs. 6,36,50,000/- per month in terms of the seventh proviso to Rule 9 of the Rules.
2.4. The assessee once again committed default in payment of duty for the months of June and July, 2011 for which the duty liability was reduced to Rs. 6,04,00,000/- vide order No. 5/2011 dated 01/06/2011. Since the assessee had failed to make the payment in June and July, 2011, the assessee was liable to pay higher duty liability of ` 6,36,50,000/- per month in terms of the aforesaid proviso. Accordingly, a show cause notice dated 11/04/2011 was issued to the assessee asking them to show cause as to why Central Excise duty amounting to Rs. 28,74,00,000/- should not be recovered in terms of the Rules read with Section 11A(1) of the Central Excise Act, along with interest thereon in terms of the said Rules read with Section 11AB ibid and also proposing to impose penalty in terms of Rule 17 of the Rules.
2.5. The notice was adjudicated vide the impugned order and the duty demand along with interest was confirmed against the appellant and an equivalent amount of penalty was also imposed under Rule 17 read with Section 11AC of the Central Excise Act, 1944. Aggrieved of the same, the appellant is before us.
3. The learned counsel for the appellant made the following submissions:
3.1. As per the Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 the Assistant Commissioner determines the monthly duty liability under Rule 6(2) of the said Rules and in the present case such duty liability has been fixed at Rs. 69 lakhs for the month of November, 2010 to January 2011, at Rs. 25 lakhs for February 2011, at Rs. 2.5 crore for the month of March 2011 and Rs. 6.04 crore for the months of June and July 2011. The appellant has discharged the said duty liability for the month of November to March 2011 in April 2011 by way of adjustment of the rebate claim sanctioned to the appellant. Similarly, the duty liability for the month of June 2011 and July 2011 was paid by the appellant in August 2011 along with interest. Once the duty liabilities are determined by the jurisdictional Assistant Commissioner under Rule 6, the said duty liability becomes final and cannot be reviewed without challenging the assessment and reliance is placed on the decision of the apex Court in the case of Commissioner of Central Excise vs. Flock (India) Ltd. 2010 (120) ELT 285 (SC). It is also contended that no differential duty demand can be raised under Section 11A on redetermination of monthly duty liability in terms of 7th proviso to Rule 9 and reliance is placed on the decision of the apex Court in the case of Collector of Central Excise vs. Cotspun Ltd. 1999 (113) ELT 353 (SC). In the said case, the Supreme Court had held that demand contrary to approved classification list can only be prospective from the date of show cause notice and cannot be raised retrospectively even though the demand might be within the normal period of limitation. To overcome the said decision, Section 11A was retrospectively amended to provide for demand of duty notwithstanding any approval, acceptance of the assessment relating to rate of duty or valuation of excisable goods. However, w.e.f. 08/04/2011, vide Section 63 of the Finance Act, 2011 Section 11A was substituted and in the new Section 11A effective from 08/04/2011, there was no provision for demand of short-levy or non-levy even in a case where the duty liability was paid/discharged on the basis of any approval, acceptance or assessment and, therefore, in respect of the demands under the new Section 11A w.e.f. 08/04/2011, the principle as laid down in the Cotspun Ltd. case (supra) would apply. In the present case, inasmuch as the show cause notice has been issued in November, 2011, the same would be governed by the provisions of Section 11A effective from 08/04/2011.
3.2. The learned counsel further argues that there is no mis-declaration of the number of machines installed in the appellants premises by the appellant and, therefore, 7th proviso to Rule 9 is not applicable in the present case. He submits that the 6th and 7th proviso to Rule 9 should be read together and the expression found appearing in the 6th and 7th proviso should have the same meaning. 6th Proviso provides that, in a case where it is found that a manufacturer has manufactured goods in contravention of the declaration regarding number of machines intended to be used by him, the duty applicable to goods shall be payable in respect of all the packing machines operated by him for the period during which the such manufacturing took place. The word found has been used in the 6th as well as 7th provisos and since both these provisions are of same Rule, the meaning of the word found would be the same for the purpose of both the above provisos. Therefore, the 7th proviso would be applicable only where the manufacturer has manufactured goods and the department finds that the manufacturer has mis-declared the particulars regarding the total number of packing machines intended to be used or installed in the factory or the department finds that the manufacturer has not declared particulars regarding total number of packing machines intended to be used or installed in the factory. In the present case, the appellant had filed intimations in Form 2 in terms of the rule stating number of packing machines installed and operated in the factory, the amount of monthly duty liability, particulars of the payment of monthly duty liability, etc. In case, no monthly duty was deposited for any month, the appellant had mentioned the duty paid as nil. Thus, the appellant kept the department informed of the number of packing machines and operated in the factory and the amounts of monthly duty liability paid by them. Under such circumstances, the 7th proviso to Rule 9 would not be applicable. The learned counsel also submits that the words find and found are defined in the various dictionaries as discover by chance or effort, become aware of, get possession by chance. In other words, the finding has to be by chance or efforts. In the present case, inasmuch as the appellant has declared the number of machinery, question of finding does not arise. It is further contended that the 6th and 7th proviso together constitute an integrated code and, therefore, when 6th proviso cannot be applied, the 7th proviso also cannot be applied. The word found appears only in the 6th and 7th proviso and nowhere else in these rules and, therefore, the meaning of the word found cannot be different for the 7th proviso. It is submitted that for the 7th proviso to apply, comparison has to be made on the following two aspects, namely, the number of machines declared in the month for which duty was last paid by him and total number of packing machines found available in his premises at that time and thereafter. The proviso requires a comparison of the two and taking higher of the two. If one of the two is inapplicable, the other proviso will not apply. It is further contended that as per Section 3A(2) and 3A(3), the factor to be taken is the number of packing machines. Based on the number of packing machines the production is deemed. The number of packing machines is not deemed or to be deemed. Further, as per Rule 4 of the rules, the factor relevant for production of the notified goods is the number of packing machines in the factory. Based on the number of packing machines, Rule 5 deems the quantity deemed to be produced by each packing machine. Further, under Rule 6(4), the number of packing machines shall be equal to the number of packing machines installed in the month. Rule 8 provides that in the case of addition or deletion of packing machines in the month, the number of packing machines shall be taken as the maximum number of packing machines installed on any day during the month. Thus, the Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 considers the actual number of packing machines declared by the appellant as the number of packing machines and based on the packing machines installed, the quantity of production is deemed for each of the packing machines. However, the rule does not provide for deeming the number of packing machines. It is, therefore, contended that the 7th proviso cannot be read to nullify the second proviso which provides for payment of duty along with interest in case there is a delay in payment of duty. Therefore, the rule in its entirety when read harmoniously, it will be seen the interpretation advanced by the department is completely wrong.
3.3. It is further argued that subsequent to the sanctioning of rebate claim, the adjustment of demand will relate back to the date of export. In the present case, the goods were exported in March, 2010, January, 2011 and March, 2011. Though the rebate claim is sanctioned in April, 2011, the appellant could not pay the monthly duty liability for the month of November, 2010 onwards, in view of the pendency of the rebate claim with the department. Since the rebate has been sanctioned it relates back to the date of export and even a limited application of 7th proviso to Rule 9 could not apply. It is also contended that the same issue was considered by the Commissioner for an earlier occasion also and vide order dated 29/11/2010 the Commissioner decided the case in favour of the appellant and it has not been challenged or reviewed by the Revenue. Therefore, the view taken in the present order is contrary to the earlier decision. In view of the above, it is pleaded that the impugned demands are not sustainable in law.
4. The learned Commissioner (AR) appearing for the Revenue, on the other hand, strongly rebuts the contentions of the appellant. He submits that the appellant had challenged the vires of Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 and in particular, the provisions of the 7th proviso in Rule 9. The said challenge also related to the 7th proviso to Rule 9 which provided for the payment of monthly duty based on number of operative packing machines declared in the month for which the duty was last paid by him or the total number of packing machines found available in his premises at that time or thereafter whichever is higher. It was contended by the appellant before the honble High Court that the second part of this amended proviso contemplated making of payment within 5 days of commencement of production which is unreasonable and arbitrary. However, the honble High Court of Bombay in Writ Petition No. 8533 of 2010 decided on 06/07/2012 upheld the validity of the Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 and held that the same are framed in accordance with the powers conferred by and to advance the object of Section 3A and are not inconsistent with it. It was particularly held that challenge to substitution of seventh proviso to Rule 9 in 2010 has to fail. Accordingly, the writ petition was dismissed. Having failed in the writ petition, the appellant is seeking to make an issue about 7th proviso to Rule 9 by stating that the same will not apply in situations covered by the said proviso. Therefore, the argument about the inapplicability of the 7th proviso to the facts obtained in the present case has to be rejected outright. Reliance is placed on the decision of the honble apex Court in the case of State vs. Parmeshwaran Subramani 2009 (242) ELT 162 (SC) wherein it was held that intention of the legislature has to be gathered from the language used and where the language is clear, the Court cannot re-write the legislation. It has no power to legislate. Courts cannot add words to and substitute and/or read words into it which are not there. Courts cannot correct or make assume deficiency when words are clear and unambiguous. Courts have to decide what the law is and not what it should be and the Courts have to adopt a construction which will carry out the obvious intention of the legislation. If these principles of statutory interpretation are applied to the facts of the case, it can be seen that there is a definite attempt on the part of the appellant in thwarting the determined monthly duty liability for the months of November 2010 to April 2011 and, therefore, in terms of the 7th proviso, the duty liability required to be re-determined, taking into account the number of machines found available, if the same were higher than the number of machines on which the duty liability was determined. On a plain reading of the 7th proviso, the liability of the appellant has to be re-determined taking into account the number of packing machines found available, if it is higher than the number of packing machines declared to the department earlier. Since in the present case, the number of packing machines found available in April 2011 was higher than those installed during November, 2010 to March, 2011, when the default in payment of duty arose, the appellant has to discharge the duty liability on the basis of such re-determination based on the number of machines found available in April, 2011. The same ratio would apply for the differential duty liability for the months of June, 2011 as also July, 2011. In view of the above, it is contended that the demands are sustainable in law and, therefore, the impugned order be upheld.
5. We have carefully considered the submissions made by both the sides. It should be appropriate at this juncture to re-visit the legal provisions.
5.1. Section 3A of the Central Excise Act, 1944 reads as follows:
SECTION 3A: Power of Central Government to charge excise duty on the basis of capacity of production in respect of notified goods:
(1) Notwithstanding anything contained in section 3, where the Central government, having regard to the nature of the process of manufacture or production of excisable goods of any specified description, the extent of evasion of duty in regard to such goods or such other factors as may be relevant, is of the opinion that is necessary to safeguard the interest of revenue, specify, by notification in the Official Gazette, such goods as notified goods and there shall be levied and collected duty of excise on such goods in accordance with the provisions of this section.
(2) Where a notification is issued under sub-section (1), the Central Government may, by rules,__
(a) provide the manner for determination of the annual capacity of production of the factory, in which such goods are produced, by an officer not below the rank of Assistant Commissioner of Central Excise and such annual capacity of production shall be deemed to be the annual production of such goods by such factory; or
(b) (i) specify the factor relevant to the production of such goods and the quantity that is deemed to be produced by use of a unit of such factor; and
(ii) provide for the determination of the annual capacity of production of the factory in which such goods are produced on the basis of such factor by an officer not below the rank of Assistant Commissioner of Central Excise and such annual capacity of production shall be deemed to be the annual production of such goods by such factory:
Provided that where a factory producing notified goods is in operation only during a part of the year only, the annual production thereof shall be calculated on proportionate basis of the annual capacity of production:
Provided further that in a case where the factor relevant to the production is altered or modified at any time during the year, the annual production shall be redetermined on a proportionate basis having regard to such alteration or modification.
(3) The duty of excise on notified goods shall be levied, at such rate, on the unit of production or, as the case may be, on such factor relevant to the production, as the Central Government may, by notification in the Official Gazette, specify, and collected in such manner as may be prescribed:
Provided that, where a factory producing notified goods did not produce the notified goods during any continuous period of fifteen days or more, duty calculated on a proportionate basis shall be abated in respect of such period if the manufacturer of such goods fulfils such conditions as may be prescribed.
(4) The provision of this section shall not apply to goods produced or manufactured, by a hundred per cent export - oriented undertaking and brought to any other place in India.
Explanation 1: - For the removal of doubts, it is hereby clarified that for the purposes of section 3 of the Customs Tariff Act, 1975 (51 of 1975), the duty of excise leviable on the notified goods shall be deemed to be the duty of excise leviable on such goods under the First Schedule and the Second Schedule to the Central Excise Tariff Act, 1985 (5 0f 1986) read with any notification for the time being in force.
Explanation 2: - For the purposes of this section the expressions hundred per cent export oriented undertaking" shall have the meanings assigned to it in section 3. 5.1.1. In pursuance to the said section, the Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 has been framed vide Notification No. 30/2008-CE (NT) dated 01/07/2008 and pan masala has been notified for the purpose of Section 3A vide Notification No. 29/2008-CX (NT) dated 01/07/2008. As per the said rules, the factor relevant to production of the individual goods shall be the number of packing machines in the factory of the manufacturer. The quantity of notified goods deemed to be produced is dependent on the number of pouches per packing machine per month which in turn is dependent on the retail sale price per pouch. Thus, the quantity deemed to be produced is dependent upon the number of packing machines operating as well as the retail sale price. The manufacturer operating under the scheme has to file a declaration under Rule 6 of the Rules wherein he has to declare the number of packing machines of various types installed in the factory and intended to be operated for the production of the notified goods. The manufacturer also has to declare the retail price of the pouches to be manufactured. On receipt of the application containing the above details and after making such enquiry as necessary, including physical verification, the annual capacity of production of the factory has to be determined under sub-rule (2) of the said Rules. Rule 7 provides for calculation of the duty payable depending upon the rate of duty specified in Notification No. 42/2008-CE dated 01/07/2008. Rule 8 deals with alteration in the number of packing machines. Rule 9, which deals with manner of payment of duty and interest and which is the rule in dispute in the case before us, reads as follows:
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 the production of such notified goods and shall be paid within five days of such commencement. 5.1.2. From a reading of Section 3A, it becomes obvious that the said section has been formulated, considering the extent of evasion of duty in regard to goods of specified description and with a view to safeguard the interest of Revenue. Clause (a) of sub-section (2) of Section 3A provides for the manner of determination of annual capacity of production and such annual capacity shall be deemed to be the annual production. Thus, the deeming provision applies to the annual capacity of production. In terms of the powers conferred by sub-section (2) and (3) of Section 3A Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 has been formulated. Under the said rule, the factor relevant to the production is number of packing machines in the factory of manufacturer and the quantity deemed to be produced is based on the number of operating machines and the retail sale price of the goods produced. Since what is deemed is the quantity of production, which is based on both the number of machines operating and installed and also the retail prices of the goods produced, the deeming provision would apply to both the factors and, therefore, argument of the appellant that the deeming provision does not apply to the number of operating machines is not correct and does not flow from the provisions of Section 3A or the rules formulated thereunder. In certain situations, the rules provided for deeming the number packing machines operating. For e.g., Rule 8 says that in case of addition or installation or removal of packing machines in the factory during a month, the number of operating packing machines for the month shall be taken as the highest number of packing machines installed on any day during the month. In other words, even if the number of operating packing machines were less than the maximum number on a particular day, then for the purpose of determination of the number of operating packing machines, the maximum number of packing machines on any day should be taken as the basis for determination of the deemed production. Therefore, the argument of the appellant that there is no provision for deeming the number of machines in the said rules and the deeming applies only to the quantity of production is totally incorrect. When the quantity of production is dependent upon the number of machines as also the retail prices of the goods, it cannot be said that the deeming provision would apply only in respect of one factor of production and not the other. This becomes evident when Rule 8 is read, which provides for deeming the number of packing machines as the highest number of packing machines installed on a particular day during the month.
5.2. The next issue for consideration is whether the 6th and 7th proviso should be read together or they should be read independently? The argument of the appellant is that they should be read together and they formed an integral code for determination of the duty liability. A reading of the 6th proviso to Rule 9 makes it abundantly clear that it applies to a situation where a manufacturer has manufactured goods of those retail prices which have not been declared by him in accordance with the provisions of these Rules or has manufactured goods in contravention of his declaration. In such a situation, the rate of duty applicable shall be the rate of duty applicable to goods of highest retail price which shall be payable in respect of the packing machines operated by him. In other words, 6th proviso deals with declaration in respect of retails prices which were found to be incorrect.
5.3. The 7th proviso deals with a situation where the manufacturer does not pay the duty payable by the due date and continues to operate any packing machines. As per the 7th proviso, so long as the non-payment continues, the manufacturer shall be liable to pay the monthly duty based on the number of operating packing machines declared for the month for which the duty was last paid by him or the total number of packing machines found available in his premises at any point of time thereafter, whichever is higher. In other words, 7th proviso deals with a totally different situation than what is envisaged in the 6th proviso. In particular, the 7th proviso deals with default in payment of duty by the manufacturer by the due date and in such a situation, it provides for taking the highest of the number operating packing machines by comparing the number of such machines when the duty was last paid with the total number of packing machines found available at any point of time thereafter. In other words, it provides for deeming of the number of operating packing machines, taking the highest of the number of packing machines as provided therein. In view of the above, the argument of the appellant that the 6th and 7th proviso becomes an integral code is totally incorrect as they deal with two different situations altogether and provide for determination of duty liability in respect of those two different situations.
5.4. In Ramnarayan Ltd. vs. Assistant Commissioner of Sales Tax [AIR 1955 SC 765 p. 769] Bhagawati J. observed as follows:
It is a cardinal rule of interpretation that a proviso to a particular provision of a statute only embraces the field which is covered by the main provision. It carves out an exception to the main provision to which it has been connected as a proviso and to no other. The same view was reiterated in Abdul Jabbar Butt vs. State of J & K [AIR 1957 SC 281 p.284] wherein it was held that it is a fundamental rule of construction that proviso must be considered in relation to the principal matter to which it stands as a proviso.
5.5. In Sundaram Pillai vs. Pattabiraman 1985 (1) SCC 591, Fazalali J. observed that by each of the proviso may serve following different purposes:
1. qualifying or excepting certain provisions from the main enactment;
2. it may entirely change the very concept of the intendment of the enactment by insisting on certain mandatory conditions to be fulfilled in order to make the enactment workable;
3. it may be so embedded in the Act itself as to become an integral part of the enactment and thus acquire the tenor and colour of the substantive enactment itself; and
4. it may be used merely to act as an optional addenda to the enactment with the sale object of explaining the real intendment of the statutory provision. 5.6. From these principles laid down by the honble apex Court, the 7th proviso has to be linked to the main para of Rule 9 which provides for manner of payment of monthly duty and interest. The 7th proviso is an independent proviso dealing with an independent/different situation and is not an appendix to the 6th proviso as contended by the learned counsel for the appellant. The 7th proviso has to be applied in those situations covered by the said proviso. The situations covered by the 7th proviso is the default in payment of duty by the manufacturer and if the default continues, how to compute the duty liability and what will be the number of packing machines which should be taken into consideration for determination of the duty liability during the default period. In the present case, it is not in dispute that the appellant did not pay the duty for the months of November 2010 to March 2011 and the number of machines found available in April 2011 was much higher than those installed and operating in the month for which the duty was last paid. The duty was last paid in October 2010 and the number of machines operating then was 20 machines whereas in April 2011 when the default was made good by adjustment of the rebate claim to the appellant, the number of machines found available was much higher. Therefore, during the period of default the number of operating machines to be taken into account for deeming the quantity of production and the consequent duty liability would be the number of machines found available in April 2011 which was higher than the number of operating machines when the duty was last paid. Similar is the situation in respect of the default for the months of June and July, 2011. The only difference being that the number of operating machines found in May 2011 when the duty was last paid was higher than the number of machines found in August, 2011 when the default was made good. Since the higher of the two has to be taken, the adoption of the number of operating machines in the month of May, 2011 for determination of duty liability is in accordance with the provisions of 7th proviso and therefore, the said determination cannot be faulted at all in view of these clear provisions of law. It is a settled position in law that the law should not be interpreted in such a way as to make the provisions redundant.
5.7. In Balavant Singh vs. Jagdish Singh 2010 (262) ELT 50 (SC) the honble apex Court held as follows:
It must be kept in mind that whenever a law is enacted by the legislature, it is intended to be enforced in its proper perspective. It is an equally settled principle of law that the provisions of a statute, including every word, have to be given full effect, keeping the legislative intent in mind, in order to ensure that the projected object is achieved. In other words, no provisions can be treated to have been enacted purposelessly. Furthermore, it is also a well settled canon of interpretative jurisprudence that the Court should not give such an interpretation to provisions which would render the provision ineffective or odious. 5.8. A Larger Bench of the apex Court in the case of Union of India vs. Dharmendra Textile Processors 2008 (231) ELT 3 (SC) held that:
It is a well-settled principle in law that the court cannot read anything into a statutory provision or a stipulated condition which is plain and unambiguous. A statute is an edict of the legislature. The language employed in a statute is the determinative factor of legislative intent. 5.9. Similarly, in the case of Rao Shiv Bahadur Singh And Another vs. The State of Vindhya Pradesh AIR 1953 SC 394 the honble apex Court held that:
it is incumbent on the court to avoid a construction, if reasonably permissible on the language, which would render a part of the statute devoid of any meaning or application. 5.10. In the light of the above, if the contention of the appellant is accepted, the 7th proviso to Rule 9 would be rendered ineffective or odious. Therefore, an interpretation which would render any provision of law odious should not be and cannot be adopted. The 7th proviso to Rule 9 is totally an independent provision providing for the computation of number of packing machines when a manufacturer defaults in payment of duty. The language of the 7th proviso, in our considered view is unambiguous and clear. The 7th proviso provides that, in a case of default in payment of duty, the duty liability will have to be re-determined taking into account higher of the number of operating packing machines at the time when the duty was last paid and the number of packing machines found available at any point of time thereafter when the default was made good. Therefore, the higher of the two numbers has to be taken into account for determination of the duty liability and therefore, in the instant case the demands are clearly in accordance with the provisions of the 7th proviso to Rule 9. It may appear that, by taking the higher of the two packing machines the levy becomes harsh. It is a well settled position in law that taxing statute has to strictly construed. In Partington vs. Attorney-General (1869) LR 4HL 100 at page 122 Lord Cairns stated principles as thus:
if the person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be. On the other hand, if the Crown, seeking to recover the tax, cannot bring the subject within the letter of the law, the subject is free, however apparently within the spirit of the law the case might otherwise appear to be. 5.11. The principles of interpretation of taxing statute have been enunciated by the honble apex Court also. In A. V. Fernandez vs The State of Kerala 1957 AIR SC 657 Bhagwati J stated that:
in construing fiscal statutes and in determining the liability of a subject to tax one must have regard to the strict letter of the law and not merely to the spirit of the statute or the substance of the law. If the Revenue satisfies the Court that the case falls strictly within the provisions of the law, the subject can be taxed. If, on the other hand, the case is not covered within the four corners of the provisions of the taxing statute, no tax can be imposed by inference or by analogy or by trying to probe into the intentions of the legislature and by considering what was the substance of the matter. 5.12. In the case before us, if we apply the principles, the 7th proviso has to be given full effect to in determination of the tax liability.
5.13. We also observe that the appellant had challenged virest of the 7th proviso to Rule 9 in Writ Petition No. 8533 of 2010 and the honble High Court of Bombay held that:
2008 Rules are framed due to powers conferred by & to advance the object of Section 3-A and are not shown to be inconsistent with it. Attempt to co-relate these Rules with Section 3 on part of the petitioners cannot be countenanced. Challenge to substitution of seventh proviso to Rule 9 in 2010 also therefore has to fail. In view of the above decision of the honble High Court of Bombay, we do not find any merit in the contention of the appellant that the 7th proviso cannot be applied to the facts of the present case.
6. The next question for consideration is whether the amendment to Section 11A effective from 08/04/2011 would render the impugned demands unsustainable inasmuch as the duty liability was determined by the Assistant Commissioner for the various months in accordance with the declaration given by the appellant for the respective months. The appellant has relied on the Cotspun Ltd.(supra) case in support of this contention. However, we do not accept this argument for the following reasons.
6.1. Rule 6(3) of the Rules provides for determination of the duty liability, taking into account the number of operating packing machines and also the retail price on the pouches of the goods manufactured. Rule 9 prescribes the manner of payment of duty and interest and also provides for determination of the duty liability in various situations. Therefore, determination of the duty liability has been provided in the Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 itself. When the law provides for determination of the duty liability, the same has to be given full effect to and cannot be rendered ineffective. Section 11A of the Central Excise Act, 1944 provides for recovery of excise duty short-levied or not levied, short-paid or not paid or erroneously refunded for any reason. The words for any reason is significant. Whatever may be the reasons for the short-levy or non-levy or short-payment or non-payment or erroneous refund, the section provides for recovery of duties by issuing a notice within the time limit prescribed therein. The normal period of limitation prescribed is one year from the due date for payment of duty and if fraud , collusion, any wilfull mis-statement, suppression of facts or contravention with intent to evade payment of duty, then the period prescribed is 5 years from the relevant date. In the present case, the demand has been made within the normal period of limitation and, therefore, the recovery of duty under Section 11A read with Rule 9 is correct in law and cannot be faulted and, therefore, the argument of the appellant to the contrary is rejected.
6.2. The Cotspun judgment pertained to a period when self-assessment by the tax payer was not in vogue and the proper officer had to assess the duty liability based on prior approval of classification and price lists. The tax regime has undergone substantial changes since then and the present tax regime envisages self-assessment of tax liability and payment of duty accordingly. Therefore, the ratio of the Cotspun decision is no longer relevant or applicable to the self-assessment regime now in vogue. It would be a complete folly to turn the clock back and adopt a principle which the legislature itself has discarded long time back.
7. Once the duty liability is upheld, the demand for interest liability is automatic and consequential. Hence the demand of interest liability under rule 9 read with Section 11AB is sustainable in law.
8. As regards the equivalent amount of penalty imposed under Rule 17, the relevant provisions of the said Rule reads as follows:
17. Penalty for contraventions, etc. (1) Subject to the provisions of section 11AC of the Act, if any manufacturer produces or removes notified goods in contravention of any provision of these rules, then all such goods shall be liable to confiscation, and the manufacturer shall be liable to a penalty not exceeding the duty leviable on the notified goods in respect of which aforesaid contravention has been committed. 8.1. As per the above Rule, penalty not exceeding the duty leviable can be imposed for contravention of the Rules. Penalty equal to duty is imposed only when there is a fraud, collusion, willful mis-statement or suppression of facts or contravention of any of the provisions of the Act or the Rules made therein with intent to evade payment of duty. In the present case, it is not in dispute that the appellant had declared the number of machines installed in the factory and the same were verified by the department and, therefore, none of the above elements exist for imposition of equal penalty. Therefore, imposition of penalty equal to the amount of duty demand confirmed is not warranted. In any case, the issue involves interpretation of law. In such a situation, imposition of penalty is not warranted. Accordingly, we set aside the penalty imposed on the appellant in the impugned order.
9. To sum up, we uphold the confirmation of duty demand along with interest liability thereon under the provisions of 7th proviso to Rule 9 of the Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 read with Section 11A and Section 11AB of the Central Excise Act, 1944. Penalty imposed under Rule 17 of the Rules read with Section 11AC is set aside.
10. The appeal is disposed of in the above terms. The stay application also stands disposed.
(Pronounced in Court on 11/04/2014) (Anil Choudhary) Member (Judicial) (P.R. Chandrasekharan) Member (Technical) */as 14