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2016 (5) TMI 607 - CESTAT BANGALORE

2016 (5) TMI 607 - CESTAT BANGALORE - 2016 (344) E.L.T. 497 (Tri. - Bang.) - Manufacturing of Pan Masala / gutkha - Seeking abatement as per provisions of PMPM Rules 2008 - for the period when there was no production i.e. from 01.07.2008 to 16.07.2008 - Held that:- the rule says that they have to give intimation at least 7 days prior non-production of goods in their factory. From the facts it is clearly proved that appellants had intimated well in advance to claim the benefit of this Rule and th .....

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d to be not correct, when the appellants are entitled for the said abatement. - Demand of excise duty - Manufacturing gutkha falling under CETA 2403990 - Period of dispute is 1st July 2008 to 16th July 2008 - Appellants took over the present manufacture unit from M/s Jalaram Industries, Bangalore, who surrendered their registration certificate and intimated the Department about their stopping of production work at the closing hours on 15.11.2008 - Held that:- when it is found that the appel .....

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the abatement) - Held that:- the laws and rules are same for everyone, whether it is the appellants or others, who are in the industry of manufacturing pan masala or other such items. The appellants cannot take the plea of not knowing when it will commence production when others in the same industry are to follow the same rules; the appellants therefore cannot claim any unfair advantage by taking this plea. Here the appellants delayed their payment for July by two days, when the Rule 9 of PMPM R .....

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Held that:- when we are setting aside the main demand imposed by the impugned order there can not be imposition of any penalty under Section 11AC read with Rule 17 of PMPM Rules 2008 and penalty therefore, is hereby dropped. - Appeal disposed of - E/22345/2014-DB - Final Order No. 20299/2016 - Dated:- 20-4-2016 - SHRI M.V.RAVINDRAN, JUDICIAL MEMBER AND SHRI ASHOK K. ARYA, TECHNICAL MEMBER For the Appellant : Shri Janaki Raman, Adv For the Respondent : Shri Pakshi Rajan, A.R. ORDER PER : ASHOK K .....

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ration on 17.11.2008. 2.1 The appellants undertook to discharge any central excise duties/service tax liabilities that may arise in respect of assessment of the notified goods to central excise duties when the goods were manufactured and sold by their predecessors namely M/s Jalaram Industries vide their letter dated 26.11.2008. In consequence, the appellant were issued show-cause notice dated 06.07.2009 for recovery of ₹ 78,75,000/- and interest thereon and for imposition of penalty. 2. .....

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as no production in the unit during 01.07.2008 to 16.07.2008 and when they paid duty for the production between 17.7.2008 to 31.07.2008 no interest liability can be imposed on them. ii. In any case when the unit was closed on account of various factors which were beyond the control of the Appellants as has been explicitly mentioned and forming part of the records, payment of duty on or before 5th July 2008 for the month of July 2OO8 does not arise as only at much later point of time, it was deci .....

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sealing of machine(s) effected on 17.07.2008, duty was paid on that day itself. v. In as much as our entitlement to claim abatement of duty covering the period of cessation of work on sealing of machines, there is no question of demand of duty by denying abatement, insisting payment on or before 5th July and imposition of penalty. As regards interest", it is our contention that the ratio of above decision is applicable and nothing could be envisaged on 5th July 2008 for determination of dut .....

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for the period of 06.07.2008 to 16.07.2008, which is more so on account of Appellants being the successor of M/ s Jalaram Industries, who were existing at that point of time, and paid the duty on 17.07.2008. vi) The appellants are not liable for payment of interest for the period of 6.7.2008 to 16.7.2008; which is more so on account of the appellant being successor of M/s Jalaram Industries Ltd. 3. The learned A.R. appearing for the Revenue has reiterated the findings given by Commissioner in hi .....

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08. 4.1 It is pointed out that appellants took over the present manufacture unit from M/s Jalaram Industries, Bangalore, who surrendered their registration certificate No. ACSPN1108NXM001 and intimated the Department about their stopping of production work at the closing hours on 15.11.2008 vide their letter dated 17.11.2008. 4.2 The appellants namely M/s Pan Parag India Ltd., Bangalore registered themselves with Central Excise Registration No. AAECP3930FXM004 dated 21.11.2008 for the same facto .....

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ed 06.07.2009 whereunder they were asked to give their reply/submissions as below: a. As to why duty of ₹ 78,75,000/- short paid be not demanded from the noticee appellant under Section 11A of Central Excise Act 1994 read with Rule 9 of Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules 2008. b. As to why Interest on duty amount of ₹ 78,75,000/- short paid during July 2008 be not demanded and recovered under Section 11AB of Central Excise Act 1944 read .....

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Determination and Collection of Duty) Rules 2008. 5. The impugned order confirmed the following: a. Demand of duty of ₹ 78,75,000/- for July 2008 under Section 11A of the Central Excise Act 19494 read with Rule 9 of Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules 2008. b. Demand of interest on duty confirmed at (a) above under Section 11AB of the Central Excise Act 1944 read with Rule 9 of Pan Masala Packing Machines (Capacity Determination and Collection .....

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ction of Duty) Rules 2008. 6. Further, the appellants in their appeal inter alia stated as below: i. They have given an undertaking dated 21.11.2008 for Central Excise duty liability, if any on the goods which were manufactured and sold by their predecessor namely M/s Jalaram Industries Ltd. will be discharged by them. ii. That after giving the above undertaking, Department issued them show-cause notice dated 06.07.2009 saying that their predecessor namely M/s Jalaram Industries did not satisfy .....

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rial b) shortage of labour c) continued maintenance of 11 Nos. of pouch making machines; and further M/s Jalaram Industries, vide letter their dated 02.07.2008 to the Superintendent of Central Excise Range informed about stoppage of production who after verification were convinced about the closure of the Unit on 30.06.2008. This is clearly vouched by verification certificate dated 01.07.2008 concerning 20 packing machines with the following report: At the time of visit there was no production o .....

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visited on 2nd July 2008 and all the twenty packing machines installed in the factory were sealed with wire and lead seal having inscription 1/78 in the presence of the representative of the assessee. 7. The appellants also submit as follows: As is clear from para 2.4 of show-cause notice, M/s Jalaram Industries vide their letter dated 16.07.2008 requested Central Excise Authorities for unsealing of 10 Nos of packing machines and informed their intention to start activity of manufacture from 17 .....

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m and substance of the averment in the notice was to the effect that M/s Jalaram lndustries Bangalore did not give the intimation 7 days prior to the commencement of period for which the abatement was sought and hence liable to pay duty of ₹ 1,57,50,000/- determined as above for the entire month without extending any abatement and that in as much as ₹ 78,75,000/- stood paid by them as duty during the month of July 2008, there has been a short payment of duty of ₹ 78,75,000/-. 7 .....

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9 of PMPM Rules. The appellant submits that the notice has been issued demanding duty, interest and proposing penalty on a wrong premise by erroneous interpretation of the provisions of PMPM Rules and on a situation in which the appellants were placed as the successor of M/s Jalaram industries, when the duty is not at all liable to be paid for the period in respect of which it has been demanded on account of the position that the predecessors during the relevant period did not do any production .....

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ter dated 30.6.2008 of M/s. Jalaram industries duly enforced by a protective action of sealing all the pouch making machines on 2.7.2008; there is no reason or justification for demanding the duty concerning such of those days of stoppage of production and sealing of machines. 7.3 The appellants submit that the officials of the Bangalore ll Commissionerate simply chose to issue the notice by recourse to erroneous interpretation of the provisions of PMPM Rules as also the object underlying the ca .....

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by M/s. Jalaram industries and in as much the levy sought to be made is not liable for payment; the appellants herein as the successors to M/s. Jalaram industries cannot be legally called upon to pay the same even in terms of the undertaking. 7.4 The appellants further submit that M/s. Jalaram industries vide their letter dated 8/7/2008 had intimated the authorities of their intention to start production activity with effect from 16.07.2008 and requested for seeking release of machines for makin .....

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nder Sec. 11A of the Central Excse Act, 1944 read with Rule 9 of PMPM Rules, 2008; besides he had confirmed demand of interest under Sec. 11AB of the Act read with provisions of Rule 9 of PMPM Rules 2008 and imposed penalty of ₹ 78,75,000/- under Sec. 11AC of the Act read with Rule 17 of PMPM Rules, 2008. 8. The appellants further in their grounds of appeal inter alia plead as under:- i. The Learned Lower Adjudicating Authority has erred in coming to the conclusion about admissibility of a .....

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disputed by the Department either in the show cause notice or discussed by the adjudicating authority in the order-in-original. iii. The learned adjudicating authority ought to have applied his mind that when Notification No. 38/2007-CE dated 19.12.2007 has been subsisting till it was recinded on 16.7.2008 in terms of Notification No. 44/2008, it does not stand to reason or merit to demand duty for the whole month of July 2008 by disregarding the valid claim of the appellant for the whole reaso .....

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by the visit of the officials and true observance of said position as true on 1.7.2008 at the time of their visit coupled with intimation dated 1.7.2008 mentioning suspension of work for pronounced reasons leading to sealing of all the pouch making machines by the officials on 2.7.2008 as a precaution, the normal corollary for any reasonable person would derive is that there was total stoppage and cessation of production up to 16.7.2008 as only on 17.7.2008 unsealing of 10 of the pouch making m .....

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e fact of stoppage of production from 30.6.2008, observance as to no production activity on 1.7.2008, sealing of all pouch packing machines on 2.7.2008, there cannot be any duty liability visiting the unit during the period when the machines were of non functional nature. vi. The learned Commissioner of Central Excise ought to have considered that when no duty liability had arisen in the matter by way of short payment, there is no question of demand of interest under Sec. 11AB of CE Act, or impo .....

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Commissioner of Central Excise, Belgaum Vs Mysore Kirloskar Ltd [2008(226)ELT 161 (SC)] 3) Commissioner of Central Excise, Customs & Service Tax Vs WF Ltd [2011(268)ELT 463 (Guj)] 9. The facts of the case along with the submissions of both sides have been carefully considered. From the facts on record and the submissions of both the sides it is undoubtedly clear that the production started in the month of July 2008, i.e. on 17.7.2008 and continued till the last day of the month i.e. 31.07.2 .....

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ior to commencement of closure as per provisions of Rule 10 of PMPM Rules 2008. In this regard, provisions of Rule 10 of PMPM Rules 2008 are quoted below: RULE 10. Abatement in case of non-production of goods. - 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 of such goods files an intimation to this effect with the Deputy Com .....

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g such period, no manufacturing activity, whatsoever, in respect of notified goods shall be undertaken and no removal of notified goods shall be effected by the manufacturer. Provided further that when the manufacturer intends to restart his production of notified goods, he shall inform to the Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, of the date from which he would restart production, whereupon the seal fixed on packing machines w .....

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008. In this regard it is to be noted that the appellants (their predecessor M/s Jalaram Industries) paid duty of ₹ 78,75,000/- for the month of July on 17.07.2008 for the production of 17.07.2008 to 31.07.2008 whereas the department assessed the duty for the month of July as ₹ 1,57,50,000/- without giving any abatement facility, which has been found to be not correct, when the appellants are entitled for the said abatement. 9.2 Regarding the demand of central excise duty for the per .....

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bservations of the CESTAT in para 6 of the above order are reproduced below: 6. As regards, the dispute for the month of March 2011, in respect of which the duty demand confirmed is ₹ 32,25,805, there is no dispute that the unit was closed from 1st March 2011 to 16th March 2011 and had functioned only from 17.03.2011 to 31.03.2011. The Department does not dispute that the appellant would be eligible for abatement under Rule 10 of the PMPM Rules for the period of closure from 1st March 2011 .....

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month and that the assessee would be required to pay proportionate duty only for the number of days for which the unit were functioning. (emphasis supplied). Therefore, so far as the duty demand of ₹ 32,25,805/- is concerned, the same is prima facie not sustainable. Here we note that the Department in the present case, has refused abatement completely which is not correct, when the facts undoubtedly call for granting abatement to the appellants. Further by this Order we hold that the appel .....

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order. 10.1 In respect of interest, the appellants substantially argue that as they did not know when they would commence production, they were not in a position to pay duty of Central Excise in advance i.e. by 5th July, which is the last date fixed as per the provisions of Rule 9 of PMPM Rules 2008 read with sub-sections 2 &3 of Section 3A of the Central Excise Act 1944. In this regard, relevant parts of Rule 9 of PMPM Rules 2008, which gives the manner of payment of duty and interest are .....

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l 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 .....

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d 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 .....

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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 pa .....

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s at any time thereafter, whichever is higher. 10.2 In respect of liability of interest for non-payment of dues of Central Excise by the due date, the appellants mainly plead that as they were not knowing when they will commence production, they paid duty for the whole month manufacture when they commenced production, which in this case is 17th July (after making adjustments for the abatement). 10.2.1 Here the pleading by the appellants that they did not know when will they commence production c .....

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ry are to follow the same rules; the appellants therefore cannot claim any unfair advantage by taking this plea. Here the appellants delayed their payment for July by two days, when the Rule 9 of PMPM Rules 2008 fixes the responsibility of payment for the month of July as on or before 15th July 2008. There is clearly liability for payment of interest on the duty of ₹ 78,75,000/- which was paid after the due date in the month of July 2008. This liability of interest on the said duty of S .....

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