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2015 (9) TMI 514 - CESTAT AHMEDABAD

2015 (9) TMI 514 - CESTAT AHMEDABAD - 2015 (330) E.L.T. 639 (Tri. - Ahmd.) - Refund claim - manufacture of Gutkha and Pan Masala - Reopening after Closure of factory due to banning the use of plastic pouches - Abatement under Rule 10 of Rules 2008 - Assessee reopened the factory - Held that:- It is revealed from the letter dt.08.02.2011 of the Appellant, as referred above, that the Appellants had given intimation to the Assistant Commissioner of Central Excise that they closed down their factory .....

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that the Appellant permanently ceases to work in respect of all the machines installed in the factory and it would be followed for surrender of registration. Incidentally, by order dt.17.02.2011, the Hon'ble Supreme Court directed that the ban will be effective from 01.03.2011. As per the direction of Hon'ble Supreme Court, the Appellant re-opened the factory on 17.02.2011. The jurisdictional Superintendent of Central Excise, de-sealed the machines. In such a peculiar facts and circumstances of .....

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the Appellants were engaged in the manufacture of Gutkha and Pan Masala, classifiable under Chapter Heading No.24039990 and 21069020 respectively of the Schedule to Central Excise Tariff Act, 1985. These items were covered under Compounded Levy Scheme as notified goods by Notification No.29/2008-CE(NT), dt.01.07.2008 issued under Section 3A of Central Excise Act, 1944, and the procedure was framed under 'Pan Masala (Packing Machine Capacity Determination & Collection of Duty) Rules, 200 .....

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Govt. of India, issued the Notification S.O.S. No.249 (E) dt.04.02.2011 banned use of plastic pouches in packaging of Pan Masala and Gutkha with immediate effect. The Appellant was unable to continue their production and therefore, by letter dt.08.02.2011, they informed the jurisdictional Assistant Commissioner, Central Excise & Customs, with a request for sealing their machines as required under Rules 2008 as they closed down their factory. Accordingly, the Superintendent of Central Excise .....

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eir factory for 6 days. 2. A show cause notice dt.15.05.2012 was issued proposing to reject the refund claim, as it is contrary to Rule 10 of the Rules 2008, insofar as the period qualifying for abatement should be any continuous period of 15 days or more. The Adjudicating authority rejected the refund claim. By the impugned order, Commissioner (Appeals) rejected the appeal filed by the Appellant and upheld the Adjudication order. 3. The learned Advocate on behalf of the Appellant submits that d .....

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re entitled to get the refund of duty as paid by them on pro-rata basis. He drew the attention of the Bench to various provisions of Rules 2008. He also relied upon the various decisions of Hon'ble Supreme Court, High Court and Tribunal. 4. On the other hand, the learned Authorised Representative on behalf of the Revenue reiterates the findings of the Commissioner (Appeals). He submits that there is no provision under Rules 2008 to refund any duty as paid by the Appellant as per the determin .....

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he abatement for non-production of goods of continuous period of 15 days or more. In the present case, that the production of the goods was stopped for 6 days and the abatement of duty cannot be granted. 5. After hearing both the sides and on perusal of the records, we find that the Appellants paid duty for the month of February 2011 by the 5th of the same month as per Rule 9 of the Rules 2008. By letter dt.08.02.2011, they informed to their jurisdictional Assistant Commissioner of Central Excis .....

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nistry of Environment & Forest has issued a Notification dt.04.02.2011, Banning the use of Plastic for Packaging Gutkha/Pan Masala & other Tobacco Products which comes into immediate effect. The Notification has enforced the Ban without considering, direction of the Supreme Court - Banning Plastics for Packing - without considering the difficulties of the manufacturer, with immediate effect. Before issue of this Notification, the Government should have considered the provisions of Notifi .....

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les, 2008." 6. It is seen from the show cause notice that the Superintendent of Central Excise incharge of the unit, effectively sealed the machines on 10.02.2011. Hon'ble Supreme Court on 17.02.2011, directed that the said notification of the Ministry of Environment & Forest will be effective from 01.03.2011. Hence, the Appellant re-opened their factory and as per an application on 17.02.2011 of the Appellant, the Superintendent of Central Excise de-sealed the machines. De-sealing .....

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ry was closed will not qualify for refund/abatement. Adjudicating authority rejected the refund claim holding that there is no provision, under Rule 2008 for refund/abatement of duty except Rule 10 of the said Rules. It has been observed that the Appellant was neither forced by an order nor by any notification of the Central Excise Department to close down their factory. The machines were sealed and de-sealed only at the request of the Appellant. By the impugned order, the Commissioner (Appeals) .....

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ection (2) and (3) of Section 3A of Central Excise Act, 1944. It is clear from sub-section (1) of Section 3A of the said Act that legislature introduced the provisions of Section 3A to safeguard the interest of Revenue to the extent of evasion of duty in regard to such notified goods, having regard to the nature of the process of manufacture or production of excisable goods. In terms of Sub-section (2) of Section 3A, the Central Government may issue notification to frame the rules for determinat .....

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by notification issued by the Central Government and collected in such manner as may be prescribed. Proviso to sub-section (3) of Section 3A extended the benefit of abatement of duty in respect of non-production of goods during any continuous period of 15 days or more. 8.1 On perusal of the Rules 2008, it is noted that as per Rule 4, the relevant factor to the production of notified goods, shall be number of packing machines in the factory of the manufacturer. Rule 6 of the said Rules envisages .....

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. Rule 8 of the said Rules provides alteration in number of operating packing machines. Second Proviso to Rule 8 states that in case of non-working of any installed packing machines during the month for any reason whatsoever, the same shall be deemed to be operating packing machines for the month. Duty payable for a particular month, as per Rule 7 of the said Rules, shall be calculated by application of the appropriate rate of duty specified in the notification, to the number of operating packin .....

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e during the month, the monthly duty payable shall be re-calculated on pro-rata basis and in case, the amount of duty so re-calculated is less than the duty paid for the month, the balance shall be refunded to the manufacturer by 20th of the following month. Proviso to Sub-section (3) of Section 3A had extended the benefit of abatement of duty, corresponding to Rule 10 of the said Rules 2008. Rule 16 of the said Rules stipulates despite anything contained in these rules, where a manufacturer per .....

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e following month. On reading of 4th Proviso to Rule 9 and Rule 16 of Rules 2008, it is clear that there are provisions for refund of excess payment of duty in certain cases and the contention of the learned Authorised Representative for the Revenue that there is no provision for refund of duty, cannot be accepted. 9. There is a distinction between the Rule 10 and Rule 16 of the said Rules. The claim of abatement under Rule 10 will apply, in case, a factory did not produce the notified goods dur .....

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e shall be recalculated on pro-rata basis and the excess amount paid by them shall be refunded. The expressions "a manufacturer permanently ceases to work in respect of all the machines installed in the factory" in Rule 16 have wide amplitude. This should be read with the broad and comprehensive meaning to cover the situation, other than Rule 10 of non-production of goods for temporary period. To sum up, Rule 10 extended abatement in case of non-production of goods for certain period. .....

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ever, the same shall be deemed to be operating packing machine for the month. The benefit under Rule 10 would be extended in case non-working of all operating packing machines for certain period. But, in case a manufacturer cease to work permanently and all the machines were sealed by the Superintendent of Central Excise on the basis of intimation given by them, resulting to none of the packing machines would be operating and the duty if any paid, should be refunded. 11. Hon'ble Supreme Cour .....

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n of India and Ors. v. Filip Tiago De Gama of Vedem Vasco De Gama (AIR 1990 SC 981)." 12. The Hon'ble Punjab & Haryana High Court in the case of Godwin Steels Pvt.Ltd. Vs CCE Chandigarh - 2010 (254) ELT 202 (P&H), while dealing with Section 3A of the Central Excise Act, 1944 read with Rule 96ZQ(2)of erstwhile Central Excise Rules, 1944, observed that it was wholly unjust for the Department to recover the duty for the whole month of November, during which, the factory had not com .....

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levant provisions of the Central Excise Act, relating to levy and collection of excise duty. Section 3 of the Excise Act is the main charging section which provides that there shall be levied and collected excise duty on excisable goods which are produced or manufactured in India. From this, it is evident that excise duty is an incidence of tax on production or manufactured of the goods. That being the case, it is difficult to sustain the plea that the appellant assessee can be charged excise du .....

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goods with a view to safeguard the interest of revenue. This, does not mean that Section 3A confer power on the Government to frame the rules to charge excise duty for the period prior to the commencement of production. Therefore, in our view the impugned order confirming demand for first three days of May 2009 when the production had not even commenced cannot be sustained. In our aforesaid view, we find strength from the judgment of Punjab & Haryana High Court in the matter of Godwin Steels .....

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r was not in production, then obvious, it is not liable to pay the duty during the period of non-production". 13. In the present case, it is revealed from the letter dt.08.02.2011 of the Appellant, as referred above, that the Appellants had given intimation to the Assistant Commissioner of Central Excise that they closed down their factory due to the notification issued by the Ministry of Environment & Forest, Government of India, banning the use of plastic pouches with immediate effect .....

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tration. Incidentally, by order dt.17.02.2011, the Hon'ble Supreme Court directed that the ban will be effective from 01.03.2011. As per the direction of Hon'ble Supreme Court, the Appellant re-opened the factory on 17.02.2011. The jurisdictional Superintendent of Central Excise, de-sealed the machines. In such a peculiar facts and circumstances of the case, in our considered view, the refund claim filed by the Appellant would come within the purview of Rule 16 of Rules 2008. 14. The lea .....

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