Excise Appeal No. 11558 of 2013
(Arising out of
OIO-22-COMMR-AKG-AHD-II-2013
dated
12/04/2013passed by
Commissioner of Central Excise-AHMEDABAD-II)
Pm Products
VERSUS
C.C.E.-Ahmedabad-ii
APPEARANCE:
Shri P.P Jadeja, Consultant appeared for the Applicant
Shri Vijay G Iyengar, Superintendent (AR) for the Respondent
CORAM: HON’BLE MEMBER (JUDICIAL), MR. RAMESH NAIR
HON’BLE MEMBER (TECHNICAL), MR. RAJU
Final Order No. A/ 10155 /2023
DATE OF HEARING: 24.01.2023
DATE OF DECISION: 25.01.2023
RAMESH NAIR
The brief facts of the case are that the appellant is the manufacturer of
Pan Masala containing Tobacco commonly known as “Gutkha” falling under
CTH 24039990 of the First Schedule of Central Excise Tariff Act, 1984. The
appellant was operating under the Pan Masala Packing Machines (Capacity
Determination and Collection of Duty) Rules, 2008 and they had followed the
said rules and regulations.
1.2 The appellant has paid the duty under the compounded levy scheme
for the days of operation of the machine in their factory under intimation
of jurisdictional officer and de- sealing and re-sealing of the machine was
taken place under the supervision of the jurisdictional officer. The appellant
also availed the abatement of duty for the days the machine was sealed and
not in operation. The details are given in the following chart.
1.3 Revenue observed that during August- 2011 , November-2011,
December- 2011, March-2012 & April, 2012 appellant had not paid the
duty for the entire month but paid only for the numbers of days their
machine was operated. Accordingly, the show cause notice bearing F. No
V.24/15-59/OA/2012 dated 06.08.2012 for recovery of Central Excise Duty
amount of Rs. 56,39,351/- was issued. The said show cause notice was
adjudicated by the Adjudicating Authority vide impugned order in original
No. 22/ COMMR/AKG/AHD-II/2013 dated 15.04.2013 wherein OIO has
confirmed the Central Excise duty demand of Rs. 56,39,351/- with interest
and penalty of Rs. 2,80,000/-. Hence the appellant has filed the present
appeal before this Tribunal.
- Shri P.P Jadeja, Learned Consultant appearing on behalf of the
Appellant submits that the Adjudicating Authority has demanded the duty
for the days for which the machine was not in operation. The contention
of the Adjudicating Authority is that the appellant was supposed to pay duty
for the entire month and thereafter they should have claimed the
abatement. It is his submission that there is no condition in the Rules that
for the days of closure of the machine first duty should be paid and then
claim the refund. Therefore, the entire order is based on the
contention which does not have support of law and therefore not
sustainable. It is his submission that abatement of duty in principle was not
objected by the department. The meaning of abatement is to reduce the
amount of abatement. Therefore, the appellant has rightly paid the duty
only for the days for which the machine was in operation. He takes
support from the following judgments:-
CCE Vs. Kaipan Pan Masala Pvt Ltd – 2012 (285) ELT 296 (Tri. Del)
Kay Pan Sugandh Pvt Ltd vs. CCE – 2017 (353) ELT 376 (Tri. Del)
Commissioner vs. Thakkar Tobacco Products Pvt Ltd – 2016 (332) ELT
785 (Guj.)
CCE Delhi –I vs. Shakti Fragrances Pvt Ltd Unit-II- 2015 324 ELT
390 (Del.)
CCE, Kanpur Vs. Trimurti Fragrances Pvt Ltd – 2019 (370) ELT 257
(All.)
Pan Parag India Ltd Vs. CCE, Bangalore-III- 2016 (344) ELT 497
(Tri. Bang)
Shri Vijay G Iyengar, Learned Superintendent (AR) appearing on
behalf of the Revenue reiterates the finding of the impugned order.
We have carefully considered the submission made by both sides and
perused the records. We find that in the present case the appellant have
followed the procedure for taking abatement of duty provided under
Rule 10 of “Pan Masala Packing Machines (Capacity Determination and
Collection of Duty) Rules, 2008” which is reproduced below:-
“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 Commissioner
of Central Excise or the Assistant Commissioner of Central Excise, as
the case may be, with a copy to the Superintendent of Central Excise,
at least seven days prior to the commencement of said period, who on
receipt of such intimation shall direct for sealing of all the packing
machines available in the factory for the said period under the physical
supervision of Superintendent of Central Excise, in the manner that
these cannot be operated during the said period:
Provided that during such period, no manufacturing activity,
whatsoever, in respect of notified goods shall be undertaken and no
removal of 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
would be opened under the physical supervision of Superintendent of
Central Excise.”
From the plain reading of the above Rule 10 it is clear that the abatement
is available to the appellant on following the condition laid therein. As
per the condition the appellant has to intimate the jurisdictional officer in
advance regarding sealing and de-sealing of the machines. In the present
case there is no dispute that the intimation was given well in advance
and the Jurisdiction Range Superintendent has de-sealed and re-sealed
the machine and the machine was operated only during that period. From
the above Rule 10 we do not find any provision for payment of duty for the
whole month and thereafter to claim refund on account of abatement of
duty. There is no dispute even by the department that the appellant is not
liable to pay duty during the period when the machine was not in operation.
The contention of the Adjudicating Authority is that the appellant was
supposed to pay the entire duty first and thereafter claim the refund. In
the present case, the appellant is eligible for abatement in principle and
under no circumstances the full duty can be demanded for the period of
abatement when the machine was not in operation. This issue has been
considered in various judgments .
4.1 In the case of Commissioner vs. Thakkar Tobacco Products Pvt Ltd –
2016 (332) ELT 785 (Guj.)the Hon’ble Gujarat High Court considered the
same issue and passed the following judgment:
- The facts of the case are required to be examined in the light of
the above statutory provisions. From the facts noted hereinabove, it is
apparent that the assessee did not produce the notified goods during a
continuous period of fifteen days in the month of March and
accordingly claimed that it was entitled to abatement of duty on a
proportionate basis for the period when the factory was not producing
notified goods and accordingly adjusted duty to that extent from the
duty payable in the month of April. The contention of the Revenue is
that abatement amounts to refund and, therefore, the procedure for
availing refund as laid down under Section 11B of the Act is required
to be followed. In this regard, it may be noted that the expression
“abatement” has not been defined anywhere in the Act or in the PMPM
Rules. Therefore, the popular or dictionary meaning of the said
expression is required to be looked into. In Black’s Law Dictionary, the
term “abatement” has been defined as a reduction, a decrease, or a
diminution; the suspension or cessation, in whole or in part, of a
continuing charge, such as rent. In the context of tax, abatement has
been stated to be diminution or decrease in the amount of tax
imposed. In the New Oxford Dictionary of English, “abatement” has
been defined as the ending, reduction or lessening of something. In
the Dictionary of English Language, “abatement” has been defined as
an amount abated, a deduction from the full amount of tax. On the
other hand, “refund” has been defined as to pay back “money” to give
or to put back. Tax abatement is ordinarily known as reduction of or
exemption from tax by a Government for a specific period. A tax
incentive is also stated to be a form of tax abatement. Thus, the
ordinary meaning of abatement is reduction, diminution and,
therefore, when an assessee is entitled to abatement of duty, he is
entitled to reduction of duty to that extent and not refund thereof as is
sought to be contended on behalf of the Revenue. It would have been
a different matter if the rules prescribed for the manner in which
abatement has to be granted. However, in the absence of any rule in
this regard or any specific provision providing for the mode of availing
abatement, the course of action adopted by the respondent-assessee
cannot be said to be in violation of any rule or any provision of the Act.
As can be seen on a plain reading of Rule 10 of the PMPM Rules, the
same merely provides that in case of factory which has not produced
the notified goods during a continuous period of fifteen days or more,
the duty calculated on a proportionate basis shall be abated in respect
of such period. The abatement, however, is subject to the condition
stipulated in Rule 10, namely that, the manufacturer of such goods is
required to file an intimation to that effect with the Deputy
Commissioner of Central Excise or the Assistant Commissioner of
Central Excise as the case may be, with a copy to the Superintendent
of Central Excise, at least three working days prior to the
commencement of such period, who on receipt of such information, is
required to direct sealing of all the packing machines available in the
factory for the said period under the physical supervision of
Superintendent of Central Excise, in the manner that these cannot be
operated during the said period. Thus, subject to the fulfilment of such
conditions, Rule 10 of the PMPM Rules provides that the duty
calculated on a proportionate basis shall be abated.
- Since great emphasis has been laid on the circular dated 12th
March, 2009 on behalf of the appellant for contending that the
principle of contemporaneaexpositio guides that contemporaneous
administrative construction should be given considerable weight and
should not be lightly overturned, it may be apposite to examine the
nature of the said circular. A perusal of the circular dated 12th March,
2009 shows that the subject of such circular is “Pre- and post-audit of
abatement orders in terms of Rule 10 of the Pan Masala Packing
Machine Rules, 2008 – clarification regarding”. A perusal of the
contents of the said circular shows that the same says that in terms of
Rule 10 of the PMPM Rules, the abatement of duty is to be given in
case the factory did not produce notified goods during any continuous
period of fifteen days or more. The JDA/JAC has to pass an abatement
order in the case. The circular further says that representations have
been received from field formations regarding whether the abatement
orders need to be subjected to pre- and post-audit in the same
manner as refund/rebate orders. Thus, the subject matter of the said
circular is as to whether abatement orders need to be subjected to
pre- and post-audit. The circular further says that circulars have been
issued in the context of procedure to sanction pre/post-audit of
refund/rebate claims and as the abatement order is in the nature of
refund, they are required to be subjected to the same administrative
procedure of pre- and post-audit as laid down by the Board from time
to time regarding refund. Accordingly, it has been provided that all
Board circulars issued in the context of pre- and post-audit of
refund/rebate claims will apply mutatis mutandis to the abatement
orders also.
- Thus, the said circular proceeds on the footing that abatement
orders are to be passed by the JDC/JAC and accordingly provides for
application of circulars issued in the context of pre- and post-audit in
relation to refund/rebate claims to abatement orders. However, the
said circular nowhere provides for the procedure to be followed for
granting abatement. As noticed earlier, the Act and the PMPM Rules
are totally silent as regards the manner in which the abatement is to
be granted and do not speak of any order of abatement being passed
by the JDC/JAC. In the opinion of this Court, in the absence of the Act
or the rules framed thereunder making any such provision, no such
provision can be read into the Act and the rules.
- In the above backdrop, the merits of the impugned order may be
examined. The Tribunal, in the impugned order, has recorded that in
none of the orders impugned before it, it is in dispute that there was a
closure of the factory for more than fifteen days and the required
procedure of due intimation of closure, sealing and due intimation or
reopening was followed. Thus, there was no dispute that the
requirements of Rule 10 of the PMPM Rules had been fulfilled. There
was also no dispute that the amount adjusted was not more than the
amount of duty mandated to be abated in terms of Rule 10 of the
PMPM Rules. The Tribunal has taken note of the fact that Rule 10 of
the PMPM Rules does not make any stipulation about abatement
having to be claimed by filing an application, though it also does not
imply to the contrary. Referring to Rule 9 of the PMPM Rules, it was
observed that when the intention of the Government is that the
amount is to be refunded and an express provision is provided
therefor, whereas Rule 10 does not make any such provision. It may
be noted that insofar as Rule 96ZO of the Central Excise Rules is
concerned, sub-rule (2) thereof expressly provides for claim of
abatement being made under sub-section (3) of Section 3A of the Act,
which would be allowed by an order passed by the Commissioner of
Central Excise of such amount as may be specified in such order.
Similarly, sub-rule (7) of Rule 96ZQ provides for abatement being
allowed by an order passed by the Commissioner of Central Excise of
such amount as may be specified in such order, subject to the
conditions enumerated thereunder. Similarly, sub-rule (2) of Rule
96ZP provides for abatement being allowed by an order passed by a
Commissioner of Central Excise of such amount as may be specified in
such order subject to the fulfilment of the conditions laid down
thereunder. Thus, in relation to independent processors of textile
fabrics, manufacturers of non-alloy steel hot re-rolled products and
manufacturers of non-alloy steel ingots, who were also assessed on
the basis of annual production capacity under Section 3A of the Act,
there was an express provision for making an order of abatement
whereas the PMPM Rules are totally silent in that regard. There is no
provision for making an order of abatement under Rule 10 of the PMPM
Rules.
- As noticed earlier, Rule 10 of the PMPM Rules provides for
abatement of duty calculated on proportionate basis in case where the
factory does not produce notified goods during any continuous period
of fifteen days or more. However, such abatement is subject to the
conditions stipulated thereunder as referred to hereinabove. Once such
conditions are satisfied, the assessee becomes entitled to abatement
of duty to the extent of the days the factory did not produce the
notified goods.
- On a plain reading of Rule 10 of the PMPM Rules, it is apparent
that while the same provides that duty calculated on a proportionate
basis shall be abated, it does not provide for any procedure for doing
- Thus, whereas Rules 96ZQ, 96ZO and 96ZP of the Central Excise
Rules, 1944, which also are schemes under the compounded levy
scheme, there were express provisions for making an order of
abatement by the Commissioner, Rule 10 of the PMPM Rules is wholly
silent in that regard. Under the circumstances, having regard to the
fact that Rules 96ZQ, 96ZP and 96ZO provided for making an order of
abatement, however, there is no corresponding provision in the PMPM
Rules, it can be inferred that the rule making authority has consciously
omitted making such provision. Therefore, in the absence of any
specific provision for making an order of abatement, it cannot be said
that the action of the assessee in calculating the duty on a
proportionate basis and setting off the same against the duty payable
in the succeeding month is, in any manner, violative of the rules or the
statutory scheme.
- Besides, in the light of the findings recorded by the Tribunal to
the effect that it is not disputed that the adjustments made were not
more than the amounts of duties mandated to be abated as per Rule
10 of the PMPM Rules, the action of the respondent-assessee in
computing the proportionate amount of duty towards the abatement
and setting it off against the duty payable in the next month does not
adversely affect the revenue in any manner. The abatement, in the
opinion of this Court, is not akin to refund and means reduction or
diminution of the duty. Therefore, when the duty stands reduced to
the extent provided in the rule, there is no liability to pay the same,
inasmuch as, to that extent the duty stands abated. Therefore, if the
assessee has correctly calculated the proportion of duty and set off the
same against the duty payable for the next month, it cannot be said
that the said action is contrary to the statutory scheme. When the
rules do not provide for the manner in which duty is required to be
abated, nor do they provide that abatement shall be by an order of the
Commissioner or any authority, but nonetheless provide for abatement
of duty and the extent of entitlement to such abatement, no fault can
be found in the approach of the assessee in suo motu taking the
benefit of such abatement.
- In the light of the above discussion, it cannot be said that the
view adopted by the Tribunal is not a plausible view warranting
interference by this Court. In the absence of any infirmity in the
impugned order passed by the Tribunal, it is not possible to state that
the same gives rise to any question of law, much less, a substantial
question of law. The appeals, therefore, fail and are accordingly
dismissed.”
In the case of CCE Delhi –I vs. Shakti Fragrances Pvt Ltd Unit-II- 2015
324 ELT 390 (Del.), the Hon’ble Delhi high Court also considered the similar
issue and passed the following judgment:
“11. In the present case, the appellant had pressed into service Rule
10 of the PMPM Rules requires the duty calculated on a proportional
basis to be abated in case the factory does not produce the notified
goods during any continuous period of 15 days in a month. Rule 10
further requires the intimation to that effect to be given to the
authorities at least three working days prior to the commencement of
the period of closure. Rule 9 requires the monthly duty payable to the
authorities to be paid by the fifth day of the same month. There is
nothing in Rule 9 to suggest that the failure to pay the duty payable on
all the machines upfront by the 5th day of a month would disentitle
the assessee to claim pro rata abatement of duty. The requirement
under Rule 10 of giving intimation three days prior to the closure has
been complied with by the assessee.
- On a collective reading of Rules 9 and 10 of the PMPM Rules, the
Court is of the view that the failure to make the payment of duty on
fifth day of every month cannot result in depriving the assessee of the
pro rata abatement of duty which he is in any way entitled to since
admittedly in the present case there has been a closure of the factory
from 14th to 31st August, 2012 and an abatement order has also been
passed on 28th August, 2012. However, the assessee would be liable
to pay the interest for the period of late deposit of duty.”
The same issue has been considered by the Hon’ble Allahabad High court
in the case of CCE, Kanpur Vs. Trimurti Fragrances Pvt Ltd – 2019 (370)
ELT 257 (All.). wherein the Hon’ble court decided as under:-
“22. The sole issue under consideration is as to giving benefit of
abatement for non-production, whether the assessee could on their
own calculate Excise duty and set off the same against the duty
payable in the next month. The argument of the Department relying
upon Rule 9 of the PMPM Rules, 2008 claiming that the monthly duty
on notified goods is to be paid by 5th day of the month and the
assessee cannot simpliciter claim set off without first depositing the
same had been repelled by the Gujarat High Court in the case of
Thakker Tobacco (supra) holding that Rule 10 of the PMPM Rules, 2008
envisages a situation and provides for abatement of excise duty
calculated on proportionate basis, in case where factory does not
produces notified goods during continuous period of 15 days or more.
- Moreover, the statue, that is proviso to sub-section (2) of Section
3A itself provides for abatement where a factory producing notified
goods did not produce the same during any continuous period of 15
days or more, the duty calculated on the proportionate basis shall be
abated in respect of such period, if the manufacturer of such goods
fulfills such condition as may be prescribed. In the present case as the
assessee having complied the statutory requirement, is entitled to the
benefit claimed by him.
- The judgment in case of Thakker Tobacco (supra) having been
accepted by the C.B.D.T. in its circular dated 16-2-2018, the
controversy does not remain any longer as the matter is not res
integra any more.
- In view of the above, we are of the considered opinion that once
the Department has accepted the judgment in case of Thakker
Tobacco (supra) and has issued circular holding that assessee is
entitled to abatement of duty, in the event of closure of factory for
continuous period of 15 days or more, without first depositing the duty
in terms of Rule 10 of PMPM Rules, 2008, the appeal of the revenue
has no force and is hereby dismissed.
- The question of law is, therefore, answered in favour of the
assessee and against the revenue.”
In view of the above High Courts Judgments and observation made by
us herein above , the demand is not sustainable. Accordingly, the impugned
order is set aside. Appeal is allowed.
(Pronounced in the open court on 25.01.2023 )
RAMESH NAIR
MEMBER (JUDICIAL)
RAJU
MEMBER (TECHNICAL)
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