Shri Roshan Aggarwal, Director vs Cce, Delhi-Iii

[Arising out of Common Order-in-Original No.04/2014-15 dated 29.04.2014 passed by the Commissioner of Central Excise, Delhi-II].

For approval and signature:

HONBLE MR. RAKESH KUMAR, MEMBER (TECHNICAL)

HONBLE MR. S.K. MOHANTY, MEMBER (JUDICIAL)

1. Whether Press reporters may be allowed to see the

order for publication as per Rule 27 of the CESTAT

(Procedure) Rules, 1982?

2. Whether it should be released under Rule 27 of the

CESTAT (Procedure) Rules, 1982 for publication in

any authoritative report or not?

3. Whether Their Lordships wish to see the fair copy

of the Order?

4. Whether Order is to be circulated to the Departmental

authorities?

__________________________________________________

Trimurti Fragrances Pvt. Ltd.

Pradeep Kumar Aggarwal, Director

Shri Roshan Aggarwal, Director Appellant

Vs.

CCE, Delhi-III  Respondent

Present for the Appellant : Mrs. Seema Jain, Advocate

Present for the Respondent: Mr.Yashpal Sharma, DR

Coram:HONBLE MR. RAKESH KUMAR, MEMBER (TECHNICAL)

HONBLE MR.S.K. MOHANTY, MEMBER (JUDICIAL)

Date of Hearing : 17/04/2015

Date of decision: 07/05/2015

Final ORDER NO.51545-51547/2015 Dated: 07/05/2015

PER: RAKESH KUMAR

The facts leading to filing of these appeals are in brief as under:-

1.1 M/s.Trimurti Fragrance Pvt. Ltd. (hereinafter referred to as the appellant company) are manufacturers of retail pouches of Gutkha, pan masala and chewing tobacco. They discharged their duty liability in respect of Gutkha / pan masala retail pouches manufactured by them under Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 (hereinafter referred to as PMPM Rules) and in respect of chewing tobacco retail pouches under Chewing Tobacco and unmanufactured tobacco packing machines (Capacity Determination and Collection of Duty) Rules 2010 (hereinafter referred to as CTUTPM Rules). The dispute in this case is in respect of only two months  March, 2011 and July 2013.

1.2 During March, 2011, the appellants unit was closed from 01.03.2011 to 16.03.2011. From 17.03.2011 to 31.03.2012 the factory was working. For the period from 01.03.2011 to 16.03.2011, the appellant had claimed abatement of duty in terms of Rule 10 of the PMPM Rules. In terms of PMPM Rules and CTUTPM Rules, an assessee is required to pay duty in respect of the goods to be produced during a month on the basis of the number of packing machines installed, by 5th of that month, and accordingly the duty liability for the month of March, 2011 was required to be discharged by the appellant company by 5th March, 2011. Since the unit was closed from 01.03.2011 to 16.03.2011, the duty was paid only on 21.03.2011 and the duty paid was only the proportionate duty for the number of days for which the unit functioned, that is, from 17.03.2011 to 31.03.2011. The department was of the view that the appellant should have first paid the duty for the whole month by the due date i.e. on 05.03.2011 and, thereafter, should have claimed the abatement for the period of closure and that they could not pay the duty directly after deducting the duty liability for the period of closure for which they were entitled for abatement. The duty demand of Rs.32,25,805/- is on this basis.

1.3 During July 2013, the appellant unit was manufacturing pan masala as well as chewing tobacco retail pouches, and as per the declaration filed by them, they had installed 8 machines for manufacture of retail pouches of chewing tobacco of MRP of Rs.1 and 13 machines had been installed for manufacture of retail pouches of pan masala of MRP of Rs.1. In respect of pan masala pouches, the duty had been paid under PMPM Rules, 2008 and in respect of chewing tobacco, the duty had been paid under CTUTPM Rules, 2010. On 24.07.2013, four new machines were added to the factory, and installed which were to be used for manufacture of pan masala pouches of the MRP of Rs.4/- per pouch and for this purpose, the necessary declaration had been filed. The point of dispute is in respect of the duty liability for the four new Pan masala packing machines added with effect from 24.07.2013 and the dispute is as to whether the duty liability in respect of these machines would be the proportionate duty liability for the period from 24.07.2013 to 31.07.2013 in terms of 4th Proviso to Rule 9 of the PMPM Rules or whether in respect of these 4 machines, the duty liability is to be discharged for the whole month of July in view of the provisions of Rule 8 of the PMPM Rules, according to which in case of addition or installation or removal or unstallation of a packing machine in a factory during a month, the number of operating packing machines for the month shall be taken as the maximum number of packing machines installed on any day during the month.

1.4 The Department was of the view that in view of the provisions of Rule 8 of the PMPM Rules, the duty liability in respect of the four new packing machines installed w.e.f. 24.07.2013 for packing of the pouches of MRP of Rs.4 is to be paid for the whole month, and that the provisions of Fourth Proviso to Rule 9 would not be applicable. The duty demand of Rs.1,51,35,483/- is on this basis.

1.5 The matter was adjudicating by the Commissioner vide Order-in-Original dated 29.04.2014 by which the duty demand of Rs.1,83,61,288/- was confirmed against the appellant alongwith interest and beside this, while penalty of Rs.91,80,644/- was imposed on the appellant company under Rule 17 of the PMPM Rules, penalty of Rs.9,00,000/- each was imposed on Shri Pradeep Kumar Aggarwal and Shri Roshan Aggarwal, Directors of the company. Against this order of the Commissioner these appeals have been filed.

2. Heard both the sides.

3. Mrs. Seema Jain, Advocate, the ld. Counsel for the appellant, pleaded that so far as the first point of dispute as to whether in respect of the month of March, 2011, the appellant were required to first pay the duty for the entire month by the due date and then claim the abatement for the period of closure from first March, 2011 to 16th March, 2011 or whether the appellant could pay duty on pro-rata basis only for the number of days for which the factory had functioned during that month, the issue stands decided in the appellants favour by the Tribunals Final Order No. 50223-50232/2015 dated 21.01.2015, wherein the Tribunal relying upon the judgment of Honble Allahabad High Court in the case of Steel Industries of Hindustan vs. CCE, Ghaziabad Reported in 2113 (293) ELT 191(All.) and also the Tribunals judgments in the cases of Shree Flavers Pvt. Ltd. vs. CCE, Delhi-IV reported in 2014 (304) ELT 441 - Kuber Khani P. Ltd. vs. CCE, Rohtak (Final Order No. 54525/2014 dated 20th November, 2014) and Shri Padma Balaji Steel Pvt. Ltd. vs. CCE, Koimbatore reported in 2009 (246) ELT 255 (Tri.Chennai) has held that for claiming the abatement for the period of closure depositing, the payment of duty for the whole month was not a pre-condition and in such cases the duty would be required to be paid only for the number of days for which the factory was working, that as regards the second point of dispute relating to July, 2013, the appellant during 1st July to 23rd July had installed only 21 machines  13 machines for manufacture of pan masala pouches of MRP of Rs.1 and 8 Machines for manufacture of chewing tobacco retail pouches of the MRP of Rs.1, that only w.e.f. 24.7.2013, 4 new machines were added for manufacture of Pan masala pouches of the MRP of Rs.4, and necessary declaration amending the earlier declaration in this regard had been filed, that while the 13 machines manufacturing pan masala pouches of MRP of Rs.1 and 8 machines manufacturing of chewing tobacco pouches of MRP of Rs.1 had functioned during the entire month, the 4 new machines installed w.e.f 24.07.2013 for manufacture of the Pan masala pouches of MRP of Rs.4/- had functioned during that month only for 8 days from 24.7.2013 to 31.7.2013, that since these 4 machines had been used for manufacture of a new MRP, the Fourth Proviso to Rule 9 of the PMPM Rules would become applicable, according to which in case a manufacturer commences manufacturing of the goods of a new MRP during a month, the monthly duty payable shall be recalculated pro-rata on the basis of total number of days in that month and the number of days remaining in that month counting from the date of commencement and incase the amount of duty calculated is less than the duty paid for the month, the balance amount shall be refunded to the manufacturer by the 20th day of the following month, that Fourth Proviso to Rule 9 of the PMPM Rules is applicable to the new machines, as these machines were used for packing of the pan masala pouches of a new MRP, that in respect of these machines, there is no justification for demanding duty for the whole month by invoking Rule 8, that the Apex Court in the case of S. Sundaram Pillai & Others vs. R. Pattabiraman & Others reported in AIR 1985 SC 582 has held that the proviso to Rule which provides for certain exceptions to the Rule cannot be given an interpretation to make it otiose, that Honble Bombay High Court in the case of Shree Satpuda Tapi Parisar Sahkari Sakhar Karkhana Ltd. vs. Union of India reported in 2014 (307) ELT 699 (Bom.) has held that the function of the proviso is to qualify the generality of the main provision by providing an exception and taking out as it were from the main provision, a portion, which, but for the proviso, would fall within the main provision and that while construing a provision having a proviso, these have to be read together without making either of them redundant or otiose and that in view of this, Rule 8 of the PMPM Rules cannot be given an interpretation which would make the Fourth Proviso to Rule 9 redundant.

She, therefore, pleaded that the impugned order confirming duty demand of Rs.1,51,35,453/- in respect of the 4 machines installed w.e.f. 24.7.2013 by holding that duty in respect of these machines would be chargeable for the whole month is not correct.

4. Shri Yeshpal Sharma, the ld. DR, defended the impugned order by reiterating the findings of the Commissioner in it. With regard to the duty demand of Rs. 1,51,35,483/- for July, 2013, he pleaded that in view of the provisions of Rule 8 in case of increase in the number of operating packing machines in a month, the maximum number of machines installed during the month is to be treated as number of operating packing machines for that month and hence the four machines added w.e.f. 24.07.2013 for the manufacture of Pan masala pouches of MRP of Rs.4/- would have to be treated as having functioned during the entire month and the duty would be chargeable on that basis. He, therefore, pleaded that there is no infirmity in the impugned order.

5. We have considered the submissions from both the sides and perused the record.

6. As regards the dispute for the month of March, 2011 in respect of which duty demand of Rs.32,25,805/- has been confirmed, there is no dispute that the factory was closed from 1st March, 2011 to 16th March, 2011 and had functioned only from 17.03.2011 to 31.03.2011. There is no dispute that the conditions for claiming abatement under Rule 10 of PMPM Rules are satisfied, that the appellant had applied for rebate and that the rebate is admissible. The appellant, however, instead of paying full duty for the Month of March, 2011 by 5th March, 2011 had paid only the proportionate duty for the period from 17th March, 2011 to 31st March, 2011 on 21st March, 2011. The Departments objection is that the appellant should have, first, paid the entire duty for the month of March by the due date, that is, by 5th of the month and only, thereafter, should have claimed the rebate. The duty demand of Rs.32,25,805/- has been confirmed on this basis which represents the duty for the period from 1st March to 16th March. However, we find that this issue stands settled in favour of the appellant by the judgment of Honble Allahabad High Court in the case of Steel Industries of Hindustan vs. CCE, Ghaziabad reported in 2113 (293) ELT 191 (All.), wherein in respect of similar provisions regarding levy of duty on compounded basis in respect of iron and steel product, Honble High Court had held that for claiming the abatement for the period of closure of the factory, depositing duty for the whole month is not a pre-condition and that in such cases the duty would be required to be paid only for the number of days for which a factory was working.

We find that same view has been taken by this Tribunal in the case of Shree Flavers Pvt. Ltd. vs. CCE, Delhi-IV reported in 2014 (304) ELT 441 - Kuber Khani P. Ltd. vs. CCE, Rohtak (Final Order No. 54525/2014 dated 20th November, 2014) Shri Padma Balaji Steel Pvt. Ltd. vs. CCE, Koimbatore reported in 2009 (246) ELT 255 (Tri.Chennai) and also in the appellants own case for the previous period decided by this Tribunals final order No.50223-50232/2015 dated 21.01.2015. In view of this the duty demand of Rs.32,25,805/- would not be sustainable. However, since the due date for payment of duty was 5th of the month and the appellant paid the duty only on 21.03.2011, the appellant in respect of the net duty payable by them, would be liable to pay interest on it as per the provisions of PMPM Rules for the period of delay.

7. Next dispute is in respect of July, 2013 for which the duty demand of Rs.1,51,35,483/- has been confirmed. During this period, the appellant in terms of Declaration made in Form  A for July, 2013 had declared that they would be operating 21 packing machines  13 for the manufacture of Pan masala pouches of MRP of Rs.1 and 8 machines for manufacture of chewing tobacco pouches of MRP of Rs.1. W.e.f. 24.07.2013, the appellant installed four new machines for making of Pan masala pouches of MRP of Rs.4, and in this regard, necessary declaration had been filed. With the installation of 4 new machines w.e.f. 24.07.2013, the highest number of machines operated during July, 2013 on any day increase to 25. In terms of Rules 7 of the PMPM Rules, the duty payable for a particular month shall be calculated by application of the appropriate rate of duty specified in the Notification No.42/08-CE dated 01.07.08 to the number of operating packing machines in the factory during the month. The rates of duty as specified in Notification No.42/08-CE dated 01.07.2008 are according to various retail sale price (RSP) slabs, and the rate prescribed for various RSP slabs are per month per machines.

The various slabs for which the rate of duty payable on prescribed in the Notification No.42/2008-CE dated 01.07.2008 are upto Rs.1, exceeding Rs.1 but not exceeding Rs.1.5, exceeding Rs. 1.5 but not exceeding Rs.2, exceeding Rs.2 but not exceeding Rs.3, exceeding Rs.3 but not exceeding Rs.4, exceeding Rs.4/- but not exceeding Rs.5 , above Rs.6 and for these RSP slabs, the rate of duty payable for Gutkha/ Pan masala on per month per machine basis have been prescribed. According to Rule 8 of the PMPM Rules  in case of addition or installation or removal or unstallation of a packing machine in the factory during the month, the number of operating packing machine for the month shall be taken as the maximum number of packing machines installed on any day during the month. Thus, if during a month 10, 15 and 21 machines have been operated on various days, the number of operating packing machines for the purpose of Rule 7 would be 21. If all the machines have been used for manufacture of the Pan masala gutkha pouches of only one RSP there would be only one rate of duty and the duty payable would be the applicable rate per machine per month multiplied by the maximum number of machines operated during the month or any day.

If, however, different machines have been used for manufacturing gutkha / pan masala pouches of different RSP slabs for which the per machine per month rate are different, the duty under Rule 7 would have to be calculated accordingly. Thus, if during a particular month gutkha pouches of four RSPs - P1, P2, P3 and P4 belonging to four different RSP slabs have been manufactured by using the machines N1, N2, N3 & N4 respectively the total duty liability for the month would be P1 N1 + P2 N2 +P3 N3 + P4 N4.

8. Rule 9 of the PMPM Rules titled manner of payment of duty and interest provides that  the monthly duty payable on notified goods shall be paid by 5th of the same month and an intimation in Form - 2 shall be filed with the Jurisdictional Superintendent of Central Excise before the 10th day of the same month. First proviso prescribes that for the month of July, 2008 the duty shall be paid by 15th day of July 2008. Second Proviso to Rule 9 provides that in case the duty is not paid by the due date, interest at the rate notified by the Government under section 11 AA/11AB would be payable for the period starting with first day after the due date till the date of actual payment of outstanding amount. Third Proviso deals with a situation where the number of operating packing machines has been increased as a result of which the duty liability of the assessee as determined under Rule 7 has been increased and in terms of third Proviso, the differential duty, if any, shall be paid by the 5th of the following month. However, the Fourth Proviso, which is reproduced below is about the manner of calculation of duty in case a manufacturer permanently discontinues the manufacture of the goods of existing retail sale price (RSP) or commences the manufacture of goods of a new RSP during the month.

Provided also that in case a manufacturer permanently dis-continues manufacturing of goods of existing retail price or commences manufacturing of the goods of a new retail sale price during the month, the monthly duty payable shall be re-calculated pro-rata on the basis of total number of days in that month and the number of days remaining in that month counting from the date of such discontinuation or commencement and duty liability for the month shall not be discharged unless the differential duty is paid by 5th 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 of the following month.

8.1 Thus, the fourth proviso is not about the manner of payment of duty but is about calculation of duty in case, during a month, the manufacture of some existing RSP has been permanently discontinued or manufacture of retail pouches of a new RSP has been started and the effect of this proviso is that it qualifies the method of calculation of duty prescribed under Rule 7.

8.2 In the present case, the appellant had commenced manufacture of new RSP w.e.f. 24.07.2013 on 4 new machines. The department invoking Rule 8 of the PMPM Rules has taken the stand that since with the installation of 4 new machines on 24.07.2013, the maximum number of operating machines has increased to 25, the duty would be calculated in respect of these machines for the whole month i.e. duty payable for July 13 in respect of pan masala pouches manufactured would be  13 multiplied by the rate applicable to MRP of Rs. 1 + 4 multiplied by the rate applicable to MRP of Rs.4. The stand of the appellant is that the duty payable in respect of the 4 new machines installed w.e.f. 23.04.2013 would be subject to the provisions of the Fourth Proviso to Rule 9 and accordingly, in respect of these four machines, duty would be chargeable only for the 8 days from 24.07.2013 to 31.07.2013.

9. Thus, point of dispute is as to whether the Fourth Proviso to Rule 9 would be applicable to Rule 7 read with Rule 8. As discussed above, it is Rule 7 which prescribes the formula for calculation of duty by applying the appropriate rate of duty as specified in the Notification No.42/2008-CE to the number of operating packing machines in the factory during the month, and Rule 8 specifies as to how number of operating packing machines is to be determined, and according to this Rule, the number of operating packing machine in a factory for a particular month shall be the maximum number of operating packing machine installed on any day during the month. The Fourth Proviso to Rule 9 is about recalculation of duty in the circumstances when during a month the manufacturer either permanently discontinues the manufacture of the goods of an existing RSP or commences the manufacture of goods of a new RSP. Thus the Fourth Proviso to Rule 9 is in respect of calculation of duty payable for a month and has to be treated as qualifying the provisions of Rule 7 read with Rule 8. Honble Bombay High Court in the case of Shree Satpuda Tapi Parisar Sahkari Sakhar Karkhana Ltd. vs. Union of India reported in 2014 (307) ELT 699 (Bom.) in para 13 of its judgment regarding the construction of the proviso has held as under:-

the general rule in construing a provision containing a proviso is to construe them together without making either of them redundant or otiose. Even if enacting part is clear, effort is to be made to give some meaning to the proviso and to justify its necessity. It is also settled preposition of law that the enacting part should be generally given such a construction which would make the exceptions carved out by the proviso necessary and the construction which would make construction unnecessary and redundant should be avoided.

9.1 If the Departments contention is accepted, it would make the Fourth Proviso to Rule 9 redundant, which in view of the above mentioned judgment of Honble Bombay High Court is not permissible. The Fourth proviso to Rule 9 clearly states that in case a manufacturer permanently discontinues the manufacture of goods of existing RSP, his monthly duty liability shall be re-calculated on pro-rata basis of the total number of days in that month and the number of days remaining in that month counting from the date of discontinuation and incase the amount of duty is so recalculated is less than the duty paid for the month the balance shall be refunded to him by 20th of the following month. This proviso also states that in case a manufacturer in a particular month commences manufacturing of the goods of a new RSP, his monthly duty liability shall be recalculated pro- rata on the basis of total number of days in that month and the number of days remaining in that month counting from the date of commencement and duty liability for the month shall be discharged unless the differential duty is paid by him by next 5th of the following month. The appellant in this case had used the four new machines installed w.e.f. 24.07.2013 for manufacture of the pouches of the new RSP  Rs.4 per pouch, which was not being earlier manufactured by them and, therefore, the provisions of this Proviso would be squarely applicable. Therefore, in respect of these four machines, the duty at the rate applicable for the MRP of Rs.4 would be chargeable only for 8 days from 24th July to 31st July and not for the entire month. The appellant have discharged duty liability on this basis only. Therefore, we hold that the duty demand of Rs.1,51,35,483/- confirmed against the appellant on the basis that in respect of these 4 machines, the duty would be chargeable for the whole month, is not sustainable and has to be set aside.

10. In view of the above discussion, the impugned order confirming duty demand of Rs.32,25,805/- for March, 2011 and duty demand of Rs.1,51,35,483/- for July, 2013 alongwith interest and equivalent penalty and also imposing penalty on its Directors Shri Pradeep Kumar Aggarwal and Shri Roshan Aggarwal is set aside . However, in respect of March, 2011, the appellant would be liable to pay interest on the net duty payable for this month for the period of delay from the due date as per the provisions of PMPM Rules. The appeals stand disposed of as above.

[Pronounced in the open Court on 07.05.2015].

(S.K.MOHANTY) (RAKESH KUMAR)

MEMBER (JUDICIAL) MEMBER (TECHNICAL)

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