Laxmi Tobacco Company VERSUS C.C.E.- Ahmedabad-ii

Customs, Excise & Service Tax 

Appellate Tribunal West Zonal

Bench At Ahmedabad

 

REGIONAL BENCH- COURT NO. 3

Excise Appeal No. 14056 of 2013 – DB

 

(Arising out of OIO-AHM-EXCUS-002-COMMR-030-13-14 Commissioner of Central Excise-AHMEDABAD-II)	dated	26/09/2013 passed
Laxmi Tobacco Company

 

VERSUS

C.C.E.-Ahmedabad-ii

 

APPEARANCE:

Shri Vijay B Joshi, Advocate for the Appellant

Shri Rajesh K Agarwal, Superintendent (AR)for the Respondent

 

CORAM: HON’BLE MEMBER (JUDICIAL), MR. RAMESH NAIR HON’BLE MEMBER (TECHNICAL), MR. C.L. MAHAR

 

Final Order No. A/ 11615 /2023

 

DATE OF HEARING: 24.03.2023 DATE OF DECISION: 24.07.2023

 

RAMESH NAIR

 

The brief facts of the case are that the appellant are engaged in the manufacture/ packing of unmanufactured Tobacco without Lime having Brand of “ Super Laxmi Tobacco” falling under chapter Heading No. 24011090 of Central Excise Tariff Act, 1985. The appellant having only 1 No. Pouch Packing Machine (PPM) of MRP of Rs. 3/- per pouch. The product of the appellant has been brought under Compounded Levy Scheme w.e.f 08.03.2010 by Chewing Tobacco &Unmanufactured Tobacco Packing Machine (Capacity Determination & Collection of Duty) Rules, 2010 vide Notification No. 11/2010- CE (NT) dated 27.02.2010 issued under Section 3 A of Central Excise Act, 1944. The appellant could not operate the machine for the whole month  and  closed  for more than 15  days  in each month by

 

following proper procedure under the said Rules, 2010 for sealing and desealing of the machine during the period from August- 2011 to March, 2012. The appellant has also paid proportionate duty payable for the period for which the machine was working during each month in time.

1.2  The case of the department is that the duty paid on pro- rata basis is not correct stating that duty for entire month to be deposited first and then go  for refund amount of duty for closure period of machine. Accordingly, the show cause notice dated 28.08.2012 was issued demanding the differential duty. The same was confirmed by the Adjudicating Authority vide Order-In-Original dated 26.09.2013 which is impugned herein. Being aggrieved by the said impugned order, the appellant filed the present appeal.

3. Shri Vijay B. Joshi, LearnedCounsel appearing on behalf of the Appellant submits that there is clear provision of abatement of duty if the machine is not operating minimum of 15 days in a month. In the present case the appellant have followed the procedure which is not under dispute. The contention of the department is that first the appellant should have paid the duty and thereafter claimed the abatement by way of refund. It is his submission that there is no procedure prescribed in this regard about refund process of the abated duty. Accordingly, the entire proceeding in the present case is without any basis of law.
   • He submits that this issue has been considered time and again in the following judgments and board circular.
     • Of C. Ex. Vs. Angadpal Indl. Pvt. Ltd- 2015 (325) ELT 228 (SC)
     • Thakkar TobaccoProducts  Ltd vs. Commr. of C. Ex. Ahmedabad- II – 2015 (325) ELT 228 (SC)
     • Commissioner Vs. Thakkar TobaccoProducts Pvt Ltd – 2016 (332) ELT 785 (Guj.)
     • CBECCircular : 1063/2/2018 – CX dated02.2018

 

3. Shri Rajesh Kumar Agarwal, Learned Superintendent (AR) appearing on behalf of the Revenue reiterates the finding of the impugned order.
4. We have carefully considered the submissions made by both the sides and perused the records. We find that even though the Rule 9 prescribesthat the duty under the scheme should be paid by 5th of the same month but at the same time Rule 10 provides abatement for the machine as not working minimum of 15 days. In the present case as regard the closure of machine for minimum 15 days and procedure for claiming the abatement has been undisputedly followed and is not objected by the department. Therefore the appellant in principle become entitled for abatement even if the appellant have not paid duty in advance by 5th of same month for the days when the machine was not working the duty was not payable in advance, the same shall stand adjusted against the duty not liable to be paid. Therefore this is a clear revenue neutral situation hence, in these circumstances, the demand cannot be raised particularly when the abatement procedure was followed by the appellant and machine was admittedly closed for minimum of 15 days in every month during August, 2011 to March, 2012 therefore, in our considered view, demand of duty is not sustainable. The very same issue has been considered by the Hon’ble Supreme Court in the case of  Of C. Ex. Vs. Angadpal Indl. Pvt. Ltd – 2015 (325) ELT 228 (SC)wherein the Apex Court has passed the following order:-

“The respondent herein is engaged in the manufacture of processed textile fabrics falling under Chapter Headings 54.06 and 55.13 of the Schedule to the Central Excise Tariff Act, 1985 (hereinafter referred to as ‘Act’).

 

2. The processed textile fabrics have been specified by the Central Government under Notification No. 41/98-C.E. (N.T.), dated 10-12-1998 as notified goods on which there shall be levied and collected a duty of excise in accordance with the provisions of Section 3A of the Central Excise Act, 1944.

 

3. Assessee, accordingly, had to discharge its liability from 16-12-1998 on the processed textile fabrics in terms of Rule 96ZQ of the Central ExciseRules, 1944 read with the Annual Capacity Production determined

 

under the Hot Air Stenter Independent Textile Processors Annual Capacity Determination Rules, 1998.

 

4. Assessee had applied for the abatement of duty paid under the provisions of sub-section (3) of Section 3A of the Act on (1) Stenter of ‘SM-ECON-2100 make which remained closed during the period from 6- 11-1999 to 14-11-1999, from 10-12-1999 to 18-12-1999 and 11-2-2000

to 19-2-2000 (2) on the Stenter of PRIMATEX for the period from 10-1- 2000 to 18-1-2000.

 

5. Sub-rule (7) of the Rule 96ZQ of the Central Excise Rules, 1944, (hereinafter referred to as ‘Rules’) as it existed prior to 1-3-2000provides that when an independent processor does not produces or manufactures the processed fabrics specified in sub-rule (1) during any continuous period of not less than 7 days and wishes to claim abatement under sub-section (3) of Section 3A of the Act, the abatement will be allowed subject to the fulfillment of the conditions prescribed in the said

 

6. The abatement of duty under consideration in respect of Stenter of ‘SM ECON-2100 make are for the period of closure from 6-11-1999 to14-11-1999, 10-12-1999 to 18-12-1999 and 11-2-2000 to 19-2-2000

and in respect of Stenter of PRIMATEX for the period of closure from 10- 1-2000 to 18-1-2000 wherein the duty payable on the stenters installed in the factory premises has to be paid in advance during the months of November, 1999, to February, 2000, in terms of closure (e) to sub-rule

(7) of the Rule 96ZQ of the Rules.

 

7. Department’s case is that Notification No. 18/99-C.E. (N.T.), dated 28-2-1999 amended the provisions of Rules 96ZQ by inserting clause (e) and according to clause (e), when the claim for abatement by independent processors is for a period less than one month, he shall be required to pay the duty as applicable for the entire period of one month and may, subsequently, seek such claim after payment of such duty and in view of this insertion, the conditions of prior payment of duty for claiming abatement were applicable from 28-2-1999 onwards.

 

8. The submission of Mr. A.K. Sanghi, learned senior counsel appearing for the Revenue, is that the Customs, Excise and Service Tax Appellate Tribunal (hereinafter referred to as CESTAT) has relied upon a circular dated 15-9-1999 to give the benefit to the respondent-assessee herein which is not the correct approach inasmuch as thereafter, Section 96ZQof the Rules were amended by inserting clause (e) thereof and as per this clause, it was incumbent upon the assessee to pay the duty first, before claiming any rebate. On that basis, it was argued that since no such duty was paid in the first instance, the respondent was not entitled to any

 

9. It is not even necessary to go into this question because of a simple reason. The vires of the aforesaid Rule was challenged before the Madras High Court in ‘Beauty Dyers v. Union of India’ [2004 (166) E.L.T. 27(Mad.)] and the High Court held the said Rule to be ultra vires the erstwhile Section 3A of the Act. Special leave petition was preferred by the Union of India against the said judgment which was dismissed by this Court. The judgment is reported by the Madras High Court in ‘Commissioner of Central Excise v. M/s. Entex Pvt. Ltd. [2015-TIOL- 2123-HC-MAD-CX = 2015 (324) E.L.T. 466 (Mad.)].

 

10. From the aforesaid, it becomes clear that the respondent was not supposed to pay any duty, more so, when the entire exercise was revenue neutral. It legitimately claimed the rebate. We, thus, do not find any reason to interfere with the impugned judgment of the High Court.

 

11. Theappeal is, accordingly, ”

 

• The similar view was taken by this Tribunal in the case of Thakkar Tobacco Products Ltd vs. Commr. of C. Ex. Ahmedabad- II – 2015

(325) ELT 228 (SC)wherein the Tribunal has taken the following decision:

 

“6. We find that the said Rule 10 does not make any stipulation about the abatement having to be claimed by filing an application therefor although it does not imply anything to be contrary either. We find the Rule 9 of the said Rules in one of its provisos stipulates that ‘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 20th day of the following month’ When seen in the light of this proviso, there is force in the argument of the appellants that when the intention of the Government was that the amount should be refunded, an express provision was made therefore; in the said Rule 10, there is no such provision.

 

In this regard, it is seen that in the case of Sri Padma Balaji Steels

(P) Ltd Vs CCE Coimbatore- 2009 (246) ELT 255 (Tri-Chennai), the Tribunal held as under:-

 

“ The claim of the assessees for abatement on the ground that the factory was closed for 9 days and 10 days respectively during the period 18-5-98 to 27-5-98 and 17-6-98 to 27-6-98 has been rejected by the Commissioner on the ground that since closure was for a period of less than one month, the assessee ought to have paid duty liability and then sought abatement, in terms of Rule 96ZO of the Central Excise Rules, 1944.

 

2.” We have heard both sides and perused the rule in question and find that there is no such stipulation contained therein. Even in case of Rule 96ZQ, where there is such a condition prescribed, the Tribunal has held in the case of Varun Silk Mills

1. Ltd. v. CCE, Surat, 2007 (214) E.L.T. 227 (Tri.-Ahmd.) that abatement benefit is a substantial benefit which cannot be denied only on the ground that the assessee did not pay duty first and then claim abatement. In the absence of any such condition in Rule 96ZO, which is relevant rule in the present case, the benefit of abatement should have been extended.The Commissioner has read into a rule something does not exist thereunder. We, therefore, set aside the impugned order and allow the appeal.”

 

7. We find that the Board vide Circular 331/47/97-CX, dt.30.08.1997, in Para 4(e) observed as under:-

 

“Rule 96ZO has been amended to allow abatement of duty, under?(e) sub-Section (3) of Section 3A of the Central Excise Act, 1944, for the induction furnace units which remain closed for seven or more days. If an induction furnace unit operating under section 3A is continuously closed for not less than 15 days, then pre-payment of duty for the closure period is not to be insisted upon provided the unit has fulfilled all the

 

conditions stated in sub-rule 2 of rule 96ZO. However, the above claim should be subject to verification by the jurisdictional Assistant Commissioner of Central Excise. If such a closure is for a reasonably long period, periodic verification about the continued closure should be done by the jurisdictional Assistant Commissioner of Central Excise”

 

Our attention was also drawn to CBEC Circular No.485/51/, d.15.09.1999, which was issued in relation to Rule 96ZQ as it existed prior to 28.02.1999.

 

“2. The Board has examined the matter. Under rule 96ZQ as it existed prior to 28-2-1999, the prerequisites for grant of abatement on closure of stenter were the stenter should have been completely closed for a continuous period of not less than

7 days and the processor should give at least 3 days notice, before closure, to the Jurisdictional Deputy/Assistant Commissioner. On receipt of the notice, the stenter was required to be sealed in such a manner as prescribed by the Commissioner. If these conditions were satisfied, then the processor was eligible for abatement. Where the stenter was closed as on 16-12-1998 itself, the question of 3 days advance notice for closure did not arise. In that case, the stenter should have been sealed in the aforesaid manner for the purpose of claiming abatement. It would be proper, therefore, that where independent processor is eligible for abatement, it should be granted to him whether he has paid the duty first or did not pay the duty in anticipation of obtaining the order of abatement. Though rule 96ZQ did not contain any specific provision in this regard, there was no specific provision to deny it either.

 

3. Accordingly,?the Board has decided that the Commissioners shoulddecidefirst whether the processor was otherwise eligible for abatement or not. In case he is eligible and he had not paid the duty, the abatement should be granted without asking him to pay duty first or where he had paid the duty, he should be reimbursed the amount of duty paid, in terms of the order of abatement issued by the Commissioner.”

 

It is seen that the situation obtaining in the present appeals is quite akin to situation dealt with in the above circular dt.28.02.1999. The Adjudicating authority has refused to follow the ratio of the said circular on the ground that the said circular was issued only for the period 16.12.1998 to 27.02.1999. While the Commissioner is technically right in his observation, it needs to be pointed out that the period (upto 27.02.1999) was mentioned in the said circular only because the said Rule was amended w.e.f. 28.02.1999. In the case of Steel Industries of Hindustan Industrial Area Vs CCE Ghaziabad- 2013

(293) ELT 191 (All.) while interpreting Rule 96ZP of the erstwhile Central Excise Rules, the Allahabad High Court observed that there is no pre-condition for depositing of duty for claiming abatement under Rule. Earlier, in the case of Varun Silk Mills Pvt. Ltd Vs CCE Surat-I – 2007 (214) ELT 227 (Tri-Ahmd.) involving a similar situation, the Tribunal held as under:-

 

“4. I have carefully considered the facts of the case. There is no dispute on the facts that during the period from 1-8-2000 to 15-8-2000. Stenter with 4 chambers remained closed and appellants were eligible for abatement. The question whether they should have paid Rs. 7 lakhs and taken refund thereafter is basically a question of procedure. I do not think that the substantial benefit should be denied on this ground.”

 

It needs to be pointed out that the CESTAT held this view inspite of the fact that the Rule 96ZQ (7)(e) specifically required the payment of duty for the entire period of the month as is evident from the language of that Rule [96ZQ(7)(e)], which is reproduced below:-

 

“When the claim for abatement by the independent processor is for a period of less than one month, he shall be required to pay the duty, as applicable, for the entire period of the month and may subsequently seek such claim after payment of such duty.”

 

Needless to say that such a requirement is conspicuous by its absence in Rule 10 of the said Rules.

 

Earlier also, the Tribunal in the case of Balkrishna Textile Ltd Vs CCE Ahmedabad – 2003 (161) ELT 740 (Tri-Del), in effect held as under:-

 

“It is clarified in the circular that ‘where independent processor was eligible for abatement, it should be granted to him whether he has paid the duty first or did not pay the duty in anticipation of the order of abatement. Though Rule 96ZQ did not contain any specific provision in this regard, there was no specific provision to deny it either’. The Board, therefore, ‘decided that the Commissioner should decide first whether the processor was otherwise eligible for abatement or not. In case he is eligible and he had not paid the duty, the abatement should be granted without asking him to pay the duty first or where he had paid the duty, he should be reimbursed the amount of duty paid, in terms of order of abatement issued by the Commissioner’. Therefore, the appellants are eligible to the abatement of duty for the period 1-2-99 to 28-2-99.”

 

8. As regards the ld.D.R.’s reference to the judgment in the case of Shivshakti Agrifoods Pvt. Ltd. (supra), the issue there was abatement of duty on some machines which were in sealed condition during the month and the Tribunal held that the abatement under said Rule 10 cannot be given in respect of individual machines. Thus, this judgment is not relevant to the present appeals.

 

The reference was also made by ld.D.R. to the case of K.P. Pan Products Pvt.Ltd (supra) but the issue there was whether the continuous period of 15 days of closure of the factory should necessarily fall during a particular calendar month and the Tribunal held that the said period of 15 days of continuous closure could fall in the two adjacent months also. Thus, this judgment is of no avail to the Revenue. As regards the Board’s circular dt.12.03.2009 stating that the abatements are subject to pre/post-audit, we do not necessarily see any fatally irreconcilable contradiction between the

 

Board’s circulars dt.15.09.1999 & 30.08.1997 on the one hand and the one dt.12.03.2009 on the other in as much as when the adjustment of abatement has been made, nothing prevents Revenue froma auditing the correctness thereof. More importantly, the Board’s circulars have no statutory force and have to be ignored to the extent they are in conflict with the judicial pronouncements.

 

9. It is quite evident from the foregoing that apart from the Board’s circulars dt.30.08.1997 and 15.09.1999 referred to earlier, in a series of judicial pronouncements, a consistent approach has been taken to the effect that in case of such adjustment of duty which is mandatorily required to be abated (as has been done in these cases),Revenue can not insist upon recovery of the amount so adjusted.

 

10. In the light of the above, being unable to uphold the impugned orders, we allow the appeals.”

 

• The aforesaid decision of the Tribunal has been upheld by the Hon’ble Gujarat High Court in the case of Commissioners vs. Thakkar Tobacco Products Pvt. Ltd.- 2016 (332) ELT 785 (Guj.).

5. Asper our above observation which gets support from the judgment

 

cited above, the	appellant are	entitled	for  the abatement and
consequently not	required to pay	any duty	during the period machines
were not working.

 

6. Accordingly, the impugned order is set aside. Appeal is allowed with consequential relief.

(Pronounced in the open court on 24.07.2023)

 

 

RAMESH NAIR MEMBER (JUDICIAL)

C.L.MAHAR MEMBER (TECHNICAL)