2016 (12) TMI 278 - AT - Central Excise

Levy of duty - manufacture of lime mixed chewing tobacco falling under Tariff Item 24039910 - Section 3A of the Central Excise Act, 1944, Compounded Levy Scheme or Section 3 of the Central Excise Act, 1944 - Held that - in the instant case, all goods falling under Tariff Item 24039910 of the First Schedule to CETA are notified for MRP based assessment in terms of Serial No. 27 of MRP based Notification. Thus, filter khaini manufactured by the appellants are notified for MRP based assessment. Now, it needs to be analyzed as to whether there is requirement to declare MRP on the packages. As per Rule 26(a) of Legal Metrology (Packaged Commodity) Rules, there is no requirement to make declaration on the package provided the net weight of the commodity is 10 grams or less. This issue has come up to this Tribunal in the case of CCE, Chandigarh Vs. Tej Ram Dharam Paul 2013 (8) TMI 607 - CESTAT NEW DELHI , where it was held that, we agree with the lower authorities that the packing machine used for packing of filter khaini pouches/pillows/sachets cannot be considered to be notified item and the goods manufactured with the aid of packing machine would not be covered under the Compounded Levy Rules. They are required to discharge duty not in terms of the said Rules but in terms of the normal provisions of law. Section 3 of the Central Excise Act, 1944 applicable - Appeal allowed - decided in favor of appellant-assessee.

Summary

Issues:
1. Interpretation of duty levy basis under Section 3A of the Central Excise Act, 1944 versus normal provisions under Section 3.
2. Requirement of declaring MRP on packages under Tariff Item 24039910.
3. Classification of filter khaini pouches manufactured with packing machines as notified goods.
4. Determination of annual capacity of production and duty collection for filter khaini pouches.

Analysis:
1. The case involved a dispute regarding the duty levy basis for the manufacture of lime mixed chewing tobacco. The appellants argued for duty under normal provisions of Section 3, while the department contended for duty under Section 3A of the Central Excise Act, 1944. The Tribunal analyzed the manufacturing process and observed that the goods fell under Tariff Item 24039910 for MRP-based assessment, leading to the conclusion that duty should be levied under normal provisions, not the Compounded Levy Scheme.

2. The issue of declaring MRP on packages was examined in light of Legal Metrology Rules. It was noted that as per Rule 26(a) of Legal Metrology (Packaged Commodity) Rules, no declaration is required on packages if the net weight is 10 grams or less. The Tribunal considered the nature of the pouches containing small sachets without any print or mark, concluding that the requirement for MRP declaration did not apply in this case.

3. The classification of filter khaini pouches manufactured with packing machines as notified goods was a crucial aspect. The Tribunal referred to a previous case and highlighted that the pouches did not bear essential information like brand name, MRP, or health warnings, akin to tea bags without such details. Consequently, the Tribunal ruled that the packing machine used for these pouches did not qualify as a notified item under the Capacity Determination Rules, necessitating duty payment under normal provisions.

4. Finally, the determination of annual production capacity and duty collection for filter khaini pouches was addressed. The Tribunal disagreed with the Commissioner's order and set it aside, allowing the appeals with consequential relief. The decision was based on the finding that the filter khaini pouches manufactured with packing machines did not meet the criteria for being considered notified goods under the Compounded Levy Rules, thus requiring duty payment under regular legal provisions.