TMI Blog2023 (9) TMI 293X X X X Extracts X X X X X X X X Extracts X X X X ..... f annual capacity of production of a factory, the said provision by way of a legal fiction stipulates that the capacity of production as determined in accordance with the Rules shall be deemed to be the annual production of goods in that factory. The computation of annual production and the same being computed by virtue of a statutory deemed fiction does not owe its genesis to Rule 8. The said legal fiction stands incorporated in Section 3A(2)(a) itself. The challenge to Rule 8 must also fail when tested on the anvil of the Second Proviso to Section 3A(2)(b). It becomes pertinent to note that the Second Proviso deals with a contingency where the factor relevant is altered or modified at any time during the year. It is in such a situation alone that the annual production is liable to be redetermined on a proportionate basis. However, and as is evident from the recital of facts in the preceding parts of this decision, the factor relevant as prescribed by Rule 4 remained unaltered. The quantification of duty liable to be paid by a manufacturer remained constantly during the period in question hinged upon the number of packing machines in the factory of a manufacturer - the Tribunal ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntire month. 3. The appellant / petitioner contends that additional duty is liable to be levied on a proportionate basis and in conjunction with the days when the additional packing machines had actually been operated. They assail the stand of the respondents that in terms of the CTUT Rules 2010, duty liability is to be ascertained and calculated based on the maximum numbers of packing machines that may have operated during any day of a particular month. For the purposes of examining the challenge which stands raised, we deem it apposite to notice the following essential facts. 4. The appellant / petitioner is a manufacturer of Flavoured Chewing Tobacco sold in packets / pouches. The retail pouches manufactured by it are chargeable to Central Excise Duty under Sub Heading 2403 99 10. The dispute in the present matters pertains to the months of June 2012, July 2012 as well as February 2013. The appellant / petitioner was discharging its duty liability on chewing tobacco pouches carrying different Retail Sale Prices in accordance with the provisions of the CTUT Rules 2010. In order to appreciate the issue which arises, it would be apposite to firstly notice the provisions of Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act. Section 3A(2)(a) enables the Union Government to frame rules providing for the manner for determination of the annual capacity of production of a factory in which notified goods are produced and further postulates that the capacity as determined in accordance with those rules shall be deemed to be the annual production of goods by such a factory. In addition to the above, the rules that may be framed by the Union Government are also envisaged to provide for the factor on the basis of which annual capacity of production would be determined. The Second Proviso to Section 3A(2)(b) further stipulates that where the factor relevant to assessing production is altered or modified at any time during the year, the annual production shall be re-determined on a proportionate basis having regard to such alteration or modification. 6. Insofar as the CTUT Rules 2010 are concerned, the factor relevant for assessing production has been defined in terms of Rule 4, which reads as follows:- 4. Factor relevant to production. - The factor relevant to the production of notified goods shall be the number of packing machines in the factory of the manufacturer. 7. Rule 5 then makes provisions to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 goods, 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 of Central Excise or the Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ified 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 that year starting from the date of commencement of the production of such notified goods. (4) The number of operating packing machines during any month shall be equal to the number of packing machines installed in the factory during that month. (5) The machines which the manufacturer does not intend to operate shall be uninstalled and sealed by the Superintendent of Central Excise and removed from the factory premises under his physical supervision. (6) In case a manufacturer wishes to make any subsequent changes with respect to any of the parameters which has been declared by him and approved by the Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, in terms of sub-rule (2), such as 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 discontinu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es for the month shall be taken as the maximum number of packing machines installed on any day during the month: Provided that in case a manufacturer commences manufacture of goods of a new retail sale price during the month on an existing machine, it shall be deemed to be an addition in the number of operating packing machine for the month: Provided further that in case of non-working of any installed packing machine during the month, for any reason whatsoever, the same shall be deemed to be a operating packing machine for the month. 12. Rule 9 stipulates the manner of payment of duty and reads as under: - 9. Manner of payment of duty and interest - The monthly duty payable on notified goods shall be paid by the 5th day of the same month and an intimation in Form - 2 annexed to these rules shall be filed with the Jurisdictional Superintendent of Central Excise before the 10th day of the same month: Provided that monthly duty payable for the period from the 8th day of March, 2010 to the 31st day of March, 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 payable in respect of all the packing machines operated by him for the period during which such manufacturing took place : Provided also that in case a manufacturer does not pay the duty payable by the due date, and continues to operate any packing machine, then till the time such non-payment continues, he shall be liable to pay the monthly duty based on the number of operating packing machines declared in the month for which duty was last paid by him or the total number of packing machines found available in his premises at any time thereafter, whichever is higher: Provided also that in case a new manufacturer commences production of notified goods in a particular month, his monthly duty payable for that month shall be calculated on the pro-rata basis of the total number of days in the month and the number of days remaining in that month startin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the respondents and thus deemed to have been added to the production line on 29 June 2012, 31 July 2012 and 27 February 2013. The additional machines are thereafter stated to have been deleted from the production line and sealed on 30 June 2012, 31 July 2012 and 28 February 2013. The case of the appellant / petitioner was that since the additional machine had been worked for only two days in June 2012, one day in July 2012, and two days in February 2013, additional duty was liable to be paid only for the days when the additional machinery was actually utilized and operated and that the addition of those machines to the production facility could not have been taken into account for the purposes of assessing its duty liability for the entire month. 15. Mr. Kohli, learned senior counsel appearing for the appellant / petitioner had contended that the Second Proviso to Section 3A(2)(b) is a clear indicator of duty being levied on a proportionate basis. It was submitted that the said Proviso is an unequivocal embodiment of the intent of the Act for duty being levied on a pro rata basis. It was his submission that if Rule 8 was to be understood in the manner as suggested by the respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rival submissions which were addressed, we deem it appropriate to note at the outset that the challenge to Rule 8 of the CTUT Rules 2010 was founded solely upon the Second Proviso to Section 3A(2)(b). The appellant / petitioner does not question the authority of the Union Government to either prescribe the manner in which the the annual capacity of production may be determined nor does it question its right to formulate a factor relevant for the purposes of estimating production in a factory. 19. As would be evident from the submission which was addressed by Mr. Kohli, the solitary ground of challenge was that if the maximum number of packing machines were to be calculated on the basis as suggested by the respondents, the same would clearly fall foul of the proportionate payment of duty principles which find resonance not just in the Proviso appended to Section 3A(2)(b) but also in light of the various provisions of the CTUT Rules 2010 which have been referred to hereinabove. 20. Having conferred our thoughtful consideration on the grounds on which Rule 8 is essentially challenged, we find ourselves unable to accede to the submissions as addressed by and on behalf of the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lenge to Rule 8 must also fail when tested on the anvil of the Second Proviso to Section 3A(2)(b). It becomes pertinent to note that the Second Proviso deals with a contingency where the factor relevant is altered or modified at any time during the year. It is in such a situation alone that the annual production is liable to be redetermined on a proportionate basis. However, and as is evident from the recital of facts in the preceding parts of this decision, the factor relevant as prescribed by Rule 4 remained unaltered. The quantification of duty liable to be paid by a manufacturer remained constantly during the period in question hinged upon the number of packing machines in the factory of a manufacturer. The factor relevant as prescribed by Rule 4 remained unchanged. The Second Proviso to Section 3A(2)(b) would stand confined to a situation where a factor relevant is altered or modified during the year. The said Proviso would thus come into play only if the basis for adjudging production comes to be altered or modified and the duty liability liable to be re-determined on a proportionate basis. In fact, we are of the firm opinion that the Proviso has no inhibiting effect on the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roduced by Rule 8. We thus find ourselves unable to approve the view as taken in Shree Shyam Pan Products. 27. The submission advanced by Mr. Kohli and resting upon Rule 9 must also face a similar fate. All that Rule 9 prescribes is the date by which differential duty may be paid by a manufacturer. The Third Proviso deals with a situation where the number of operating packing machines stand increased during a month. It is in that context that it stipulates that the additional duty which may thus become payable would have to be deposited by the fifth day of the following month. This would clearly appeal to reason since the principal part of Rule 9 requires that the monthly duty be deposited by the fifth day of the same month. If the Rule were to stop at this point, there would clearly be a vacuum in case an additional packing machine were to be added to the production line after the fifth day of the said month. The Third Proviso to Rule 9 consequently cannot possibly be read as diluted the deeming fiction which stands embodied in Rule 8. 28. Accordingly, and for all the aforesaid reasons, we find ourselves unable to hold Rule 8 as being ultra vires Section 3A nor do we find any erro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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