2024 (11) TMI 612 - HC - Central Excise

Abatement claim as stipulated in Rule 10 of Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules 2008 - less than 15 days continuous closure in each calendar month or otherwise - HELD THAT - Rule 10 which provides for abatement requires a continuous period of 15 days or more and there is no stipulation in the said Rule as to the period of 15 days or more being in one month or more than one month. The only stipulation being that the continuous period without a break has to be more than 15 days. In the instant case there was no production of notified goods for a period of 41 days in the factory of the respondent. Similar issue arose before the High Court of Punjab and Haryana in COMMISSIONER CENTRAL EXCISE VERSUS M/S KAY FRAGRANCE P. LTD. 2013 (9) TMI 697 - PUNJAB HARYANA HIGH COURT wherein in similar circumstances the Division Bench of Punjab and Haryana High Court held that the continuous period of 15 days or more prescribed under Rule 10 could not be read in isolation to raise an inference that if closure in a month was less than 15 days a party would not be entitled to abatement of duty. Consequently the questions of law raised are thus answered by holding that closure of a continuous period of 15 days or more is not restricted to a calendar month and can be spread over in more than one month. Even in a particular month if the closure is less than 15 days the Assessee would still be entitled to abatement provided the continuous period of closure is more than 15 days and other stipulations of Rule 10 are satisfied by the Assessee. The questions of law are thus answered in favour of the Assessee and against the Revenue - the appeal of the Revenue is dismissed.

Summary

Issues:
Interpretation of Rule 10 of Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 regarding abatement entitlement for less than 15 days continuous closure in a month.
Whether the period for granting abatement can be isolated from the rest of the Rules.

Analysis:
The appeal before the High Court concerned the entitlement of an Assessee, a manufacturer of Pan Masala, to claim abatement under Rule 10 of the Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008. The Assessee had applied for abatement for the period from 01.03.2011 to 10.04.2011, claiming that its factory remained closed during this time, making it eligible for abatement due to the absence of production of notified goods. The Revenue granted abatement for the period up to 31.03.2011 but denied it for the subsequent period of 01.04.2011 to 10.04.2011, citing that the factory did not remain closed continuously for over 15 days in April. The crux of the issue was whether the closure period of 15 days or more, as required by Rule 10, needed to be within a single calendar month.

The Revenue contended that since the Rules consistently referred to a specific calendar month, the closure period should also align with this monthly time frame. Conversely, the Assessee argued that Rule 10 did not specify the closure period to be within a single month, emphasizing that the key requirement was a continuous closure of 15 days or more, irrespective of the month boundaries. The Assessee's counsel highlighted that the factory remained closed for 41 days without any manufacturing activity during the disputed period, meeting the conditions of Rule 10.

The High Court analyzed the language of Rule 10 and referred to a similar case before the High Court of Punjab and Haryana, where it was held that the continuous closure period of 15 days or more should not be confined to a single calendar month. The Court concurred with this interpretation, emphasizing that the critical factor was the uninterrupted closure exceeding 15 days, regardless of whether it straddled multiple months. Therefore, the Court ruled in favor of the Assessee, affirming their entitlement to abatement for the period in question.

In conclusion, the High Court dismissed the Revenue's appeal, upholding the Assessee's right to abatement for a continuous closure period of 15 days or more, irrespective of the monthly boundaries. The judgment underscored the importance of fulfilling the conditions of Rule 10, such as providing prior intimation to the authorities, for claiming abatement in excise duty cases.