CHEWING TOBACCO AND UNMANUFACTURED TOBACCO PACKING MACHINES (CAPACITY DETERMINATION AND COLLECTION OF DUTY) RULES, 2010 - AN OVERVIEW

[Mr. M. GOVINDARAJAN]

INTRODUCTION:

The Central Government in exercise of powers conferred by Section 3A (3)(2) of the Central Excise Act, 1944 ('Act' for short) has made the Rule namely 'Chewing Tobacco and Unmanufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010 ('Rule' for short). The Rule contains 19 rules and six forms.

DEFINITIONS:

Rule 2(b) defines 'chewing tobacco' as chewing tobacco falling under tariff item 2403 99 10 of First Schedule to the Tariff Act. Rule 2(g) defines 'unmanufactured tobacco' as unmanufactured tobacco falling under tariff hearing 2401 of the First Schedule to the Tariff Act. Rule 2(d) defines 'packing machine' which includes all types of Form, Fill and Seal (FFS) Machines and Profile Pouch Making Machines, by whatever name called, whether vertical or horizontal, with or without collar, single track or multi-track and any other type of packing machine used for packing of pouches of notified goods. Rule 2(c) defines 'notified goods' as unmanufactured tobacco, bearing a brand name, and chewing tobacco notified under Section 3A (1) of the Act by the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 10/2010-Central Excise (N.T.), dated 27th February, 2010. The said notification defines 'brand name' a brand name, whether registered or not, that is to say, a name or a mark, such as a symbol, monogram, label, signature or invented words or any writing which is used in relation to a product, for the purpose of indicating or so as to indicate, a connection in the course of trade between the product and a person using such name or mark with or without any indication of the identity of that person.

DECLARATION:

The Rule requires that a manufacturer of notified goods is to give declaration to the Department. Rule 6 provides that a manufacturer of notified goods shall immediately on coming into force of these rules, and not later than 8th March, 2010, declare in Form 1 annexed to these rules, containing the following details:

i. the number of single track packing machines available in the factory;

ii. the number of packing materials out of(1), which are installed in his factory;

iii. the number of packing machines out of (1), which he intends to operate in his factory for production of pouches of notified goods with lime tube and without lime tube, respectively with effect from the 8th day of March, 2010;

iv. the number of multiple track or multiple line packing machine available in his factory;

v. the number of multiple track or multiple line packing machines out of (iv), which are installed in his factory;

vi. the number of multiple track or multiple line packing machines out of (iv), which he intends to operate in his factory for production of pouches of notified goods without lime tube and with lime tube, respectively, with effect from the 8th day of March, 2010;

vii. the name of the manufacturer of each of the packing machine, its identification number, date of its purchase and the maximum packing speed at which they can be operated for packing of pouches of notified gods, with lime tube and without lime tube, of various retail sale prices;

viii. description of goods to be manufactured including whether unmanufactured tobacco or chewing tobacco or both, their brand names, whether pouches shall contain lime tube or not;

ix. denomination of retail sale prices of the pouches to be manufactured during the financial year;

x. the plan and details of the part or section of the factory premises intended to be used by him for the manufacture of notified goods of different denomination of retail sale prices and the number of machines intended to be used by him in each such part or section to the jurisdictional Deputy Commissioner or Central Excise or the Assistant Commissioner of Central Excise, as the case may be, with a copy to the jurisdictional Superintendent of Central Excise.

A new manufacturer shall file such declaration at least seven days prior to the commencement of commercial production of notified goods in his factory.

APPROVAL OF DECLARATION:

On receipt of the declaration, the Deputy Commissioner or the Asst. Commissioner, as the case may be, shall, after making such enquiry as may be necessary including physical verification, approve the declaration and determine and pass order concerning the annual capacity of production of the factory within three working days. The concerned Officer may direct for modifications in the plan or details of the part or section of the factory premises intended to be used by the manufacturer for manufacture of notified goods of different retail sale prices, as he thinks proper, for effective segregation of the parts or sections of the premises and the machines to be used in such parts or sections before granting approval.

If the manufacturer does not receive the approval within the period of three working days the approval shall be deemed to have been granted subject to the modifications, if any, which the concerned officer may communicate later on but not later than thirty days of filing of the declaration.

CHANGES IN PACKING MACHINES:

In case a manufacturer wishes to make any subsequent changes relating to addition or removal of packing machines in the factory or making alterations in any part or section of the approved premises or in the number of machines to be used in such part or section or commencing manufacture of goods of a new retail sale price or discontinuation of manufacturing of goods of existing retail sale price, and similar other details, he shall file a fresh declaration to this effect at least three working days prior to such subsequent changes, to the concerned Officer, who shall approve such fresh declaration and re determine the annual capacity of production.

CALCULATION OF ANNUAL CAPACITY OF PRODUCTION:

The annual capacity of production shall be calculated by application of the appropriate quantity that is deemed to be produced by use of one operating packing machine as specified in Rule 5, as detailed below, to the number of operating packing machines in the factory during the month beginning which the capacity is being determined:

Sl. No.	Retail sale price (per pouch)	Number of pouches per oper Machine per month	ating packing
		Pouches not containing Lime tube	Pouches containing Lime tube
(1)	(2)	(3)	(4)
1	Upto Rs.1.50	22,46,400	21,46,150
2	From Rs.1.51 to Rs.2.00	20,21,760	19,21,920
3	From Rs.2.01 to Rs.3.00	20,21,760	19,21,920
4	From Rs.3.01 to Rs.4.00	18,96,960	17,72,160
5	From Rs.4.01 to Rs.5.00	18,96,960	17,72,160
6	From Rs.5.01 to Rs.6.00	18,96,960	17,72,160
7	Above Rs.6.00	17,97,120	16,97,280

For this purpose of this rule, if there are multiple tack or multiple line packing machines, one such track or line shall be deemed to be one individual packing machine for the purposes of calculation of the number of pouches per operating packing machine per month.

Annual capacity of production for the period from the 8th day of March, 2010 to the 31st day of March, 2010 shall be calculated on the pro rate basis of the total number of days in the month of March, 2010 and the number of days remaining on the month starting from and including 8th day of March, 2010.

In case a new manufacturer commences production of notified goods, his annual capacity of production shall be calculated on the pro-rata basis of the total number of days in that year and the number of days remaining in the year starting from the date of commencement of the production of such notified goods.

The number of operating packing machines during any month shall be equal to the number of packing machines installed in the factory during the month.

ALTERATION IN NUMBER OF OPERATING PACKING MACHINES:

In case of addition or installation or removal or un-installation of a packing machine in the factory during the 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.

In case a manufacturer commences manufacture of goods of a new retail sale price during the month on existing machine, it shall be deemed to be an additional in the number of operating packing machine for the month. In case of non working day of any installed packing machine during the month for any reason whatsoever, the same shall be deemed to be an operating packing machine for the month.

In case a manufacturer does not intend to further operate a packing machine, he shall intimate the same to the Deputy Commissioner of Asst. Commissioner, as the case may be, at least three working days in advance from the date so intended, whereupon the same shall be uninstalled and sealed by the Superintendent of Central Excise and removed from the factory premises under his physical supervision.

In case a manufacturer wants to add or install a packing machine in his premises, he shall give a notice to this effect at least three working days in advance from the date of such addition or the installation of the packing machine to the Deputy Commissioner or Asst. Commissioner, as the case may be, who shall allow the addition or installation under the physical supervision of Superintendent of Central Excise.

RETAIL SALE PRICE:

The Rule requires that every manufacturer shall declare the retail price of the notified goods on the package of such gods. No manufacturer shall be allowed to keep in his factory any stock of packing material for goods of those retail sale prices which have not been declared by him and also not be allowed to trade. If he discontinues manufacture of goods he shall declare the balance stock of notified goods of existing retail sale prices and their packing material on the day he discontinues manufacturing of goods of existing retail sale prices. If the manufacturer fails to declare the same before removing the goods from the place of manufacturer or declares a retail sale price which is not the retail sale price as required to be declared or tampers with, obliterates or alters declared on the package after their removal from the place of manufacture, then such goods shall be liable to confiscation. The retail price of such goods shall be ascertained by the Deputy Commissioner or Assistant Commissioner in the following manner:

* if the manufacturer has manufactured and removed identical goods, within a period of one month, before or after removal of such goods, by declaring the retail sale price, then the said declared retail sale price shall be taken as the retail price of such goods;

*if the retail sale price cannot be ascertained the same may be ascertained by conducting the enquiries in the retail market where such goods have normally been sold at or about the same time of the removal of such goods from the place of manufacture.

If more than one retail price is ascertained then the highest of the retail price, so ascertained shall be taken as the retail sale price of all such goods.

Where a manufacturer alters or tampers the retail sale price on the package of goods after their removal from the place of manufacture, resulting into increase in the retail sale price, then such increased retail sale price shall be taken as the retail sale price of all goods removed during a period of one month before and after the date of removal of such gods. Where the manufacturer alters or tampers the declared retail sale price resulting into more than one retail sale price available on such goods, then the highest of such retail sale price shall be taken as the retail sale price.

PAYMENT OF DUTY:

* The monthly duty payable on notified goods shall be paid by 5th day of the 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;

* The monthly duty payable for the period from 08.03.2010 to 31.03.2010 shall be calculated on the pro-rata basis of the total number of days in the month of March 2010 and the number of days remaining in the month starting from and including 08.03.2010 and the same shall be paid on or before 15.03.2010;

* If the manufacturer fails to pay the duty by the due date, he shall be liable to pay the outstanding amount along with interest at the rate specified by Central Government vide notification under Section 11A for the period starting with the first day after the due date till the date of actual payment;

* In case of increase in the number of operating packing machines during the month on account of addition or installation the differential duty, if any, shall be paid by the 5th day of the following month;

* In case a manufacturer permanently discontinues the manufacture of goods or commences manufacture of goods of a new retail price during the month, the monthly duty payable shall be recalculated on the pro-rata basis of the total number of days in that month and the number of days remaining in that month starting from date of such discontinuation or commencement of the duty liability for the month shall not be deemed to have been 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;

* If there is revision in the rate the monthly duty shall be recalculated on the pro-rata basis of the total number of days in the 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;

* In case the retail price has not been declared or manufactured goods in contravention of his declaration then the differential retail 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;

ABATEMENT:

In case a factory did not produce the notified goods during any continuous period of fifteen days or more, the duty calculated on a proportionate basis shall be abated in respect of such period provided the manufacturer files intimation to this effect with the Authority at least three working days prior to the commencement of the said period. The Authority shall direct for sealing of all the packing machines available under the physical supervision of Superintendent of Central Excise. During such period no manufacturing activity and no removal of goods shall be effected except that notified goods already produced before the commencement of said period may be removed within first two days of the said period.

CENVAT CREDIT:

A manufacturer shall be allowed to take credit of duty, National Calamity contingent duty, education cess, secondary and higher secondary cess and the additional duty of excise paid in bulk packs received in his factory on or after 08.03.2010 for use in manufacture of chewing tobacco. The CENVAT credit may be taken immediately on receipt of bulk packs and may be utilized for payment of duty leviable. While paying duty, the CENVAT credit shall be utilized only to the extent such credit is available on the last day of the month preceding the month for which duty is paid. The credit shall be taken based on the invoice issued by a manufacturer for clearance of bulk packs. The manufacturer shall maintain proper records for the receipt, disposal, consumption and inventory of the bulk packs used for manufacture.

If the CENVAT credit has been taken or utilized wrongly, the same along with interest shall be recovered from the manufacturer and the provisions of section 11A and 11AB of the Act shall apply mutatis mutandis for effecting such recoveries. It is also liable for confiscation and penalty not exceeding the duty on such packs of chewing tobacco.

FACTORIES CEASING TO WORK:

Where a manufacturer permanently ceases to work and who has filed intimation for surrender of registration with the Authority with a copy to the Superintendent of Central Excise the duty payable by him for the month in which he ceases to work shall be calculated on the pro rata basis and the duty paid for the month shall be adjusted and on adjustment if there is any excess payment, it shall be refunded to the manufacturer by the 20th day of the following month and deficiency, if any, shall be payable by him by the 5th day of the following month.

PENALTY:

If any manufacturer produces or removes 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.