Abatement can be claimed even if duty paid belatedly

By | November 6, 2015
(Last Updated On: November 6, 2015)

Facts of the case

The appellant’s machines were sealed and there was no production from 16.4.2013 to 15.5.2013. The appellant had already deposited duty of 70 lakh for the whole of month of April, 2013. Therefore, the appellant filed an application on 8.5.2013 for abatement of duty for the period 16.4.2013 to 30.4.2013. The same was allowed. As per Rule 9, the appellant is bound to pay duty before 5th of every month. After unsealing of the machines, appellant paid duty and interest for the month of May, 2013 with delay on 16.5.2013. The same was accepted by department. Thereafter appellant filed application for abatement of duty paid for the period 1.5.2013 to 15.5.2013 during which period there was no production in the factory

Department Claim :-

Firstly, the application for abatement is in regard to above period from 01.05.2013 to 15.5.2013. The production was closed actually from 16.4.2013 upto 15.05.2013. This is a continuous period. The appellant has the period falling in April and May into two separate periods. Being a single period of closure of production, the period in the claim is included in the earlier application which has been allowed.

Secondly, as per Rule 9 the duty has to be paid within 5th day of every month. The appellant paid the duty for month of May with delay only on 16.5.2013. As the duty was not deposited within the due date the claim of abatement cannot be granted.

Thirdly, Rule 10 provides that the assessee has to give intimation to the department at least seven working days prior to the closure of production

HELD

In case of production capacity based duty on Pan Masala, abatement of duty in case of closure of factory can be claimed even if :

(a) separate abatement applications are filed for each continuous period of 15 days or more; and

(b) duty was paid belatedly with interest

CESTAT, NEW DELHI BENCH

AMP Pan Products (P.) Ltd.

v.

Commissioner of Central Excise, Raipur

SMT. SULEKHA BEEVI C.S., JUDICIAL MEMBER

APPEAL NO. E/54091/2014-EX-SM
FINAL ORDER NO. 52829/2015

SEPTEMBER  10, 2015

S.K. Pandey, Adv. for the Appellant. Devender Singh, DR for the Respondent.

ORDER

1. The above appeal is filed challenging the order which denied the abatement of Rs. 33,87,097/- sanctioned by the original authority under the Pan Masala Packaging Machines (Capacity Determination and Collection of Duty) Rules, 2008.

2. The appellant who is a manufacturer of Pan Masala has five Pan Masala pouch packing machines installed in his factory. In April, 2013, the appellant paid Rs. 70,00,000/- (seventy lakh) towards duty under sub-clause (3) of section 3A of Central Excise At, 1944. The appellant vide letter dated 12.4.2013 requested the department to seal all five pouch packing machines with effect from 16.4.2013. The Range Superintendent sealed all the five pouch packing machines under regular panchnama dated 15/16.04.2013. Thereafter on 10.5.2013 and 13.5.2013, the appellant requested the Assistant Commissioner for unsealing of the five pouch packing machines in order to restart production. As per direction of the Assistant Commissioner, the Range Superintendent unsealed the five machines on 15.5.2013. There was no production of pan masala in the factory for the period 16.4.2013 upto 15.5.2013. Rule 10 of Pan Masala Packaging Machines (Capacity Determination and Collection of Duty) Rules, 2008, provides that the assessee can claim abatement of the duty paid in case the factory did not produce goods during any continuous period of fifteen days or more. The appellant’s machines were sealed and there was no production from 16.4.2013 to 15.5.2013. The appellant had already deposited duty of 70 lakh for the whole of month of April, 2013. Therefore, the appellant filed an application on 8.5.2013 for abatement of duty for the period 16.4.2013 to 30.4.2013. The same was allowed. As per Rule 9, the appellant is bound to pay duty before 5th of every month. After unsealing of the machines, appellant paid duty and interest for the month of May, 2013 with delay on 16.5.2013. The same was accepted by department. Thereafter appellant filed application for abatement of duty paid for the period 1.5.2013 to 15.5.2013 during which period there was no production in the factory. The original authority sanctioned the claim of Rs. 33,87,097/-. The department filed appeal. In appeal the abatement sanctioned was set aside. Aggrieved the appellant is before the Tribunal.

3. Learned Counsel for the appellant referred to the provisions of sub-clause (3) section 3A of Central Excise Act, 1944 and also Rules 4 and 10 of Pan Masala Packaging Machines (Capacity Determination and Collection of Duty) Rules, 2008. He contended that Rule 10 prescribes only two conditions for claiming abatement. That both these conditions having been satisfied in the case of appellant, the denial of abatement is unjustified.

4. Against this, learned DR supported the impugned order and urged that the Commissioner (Appeals) has rightly denied abatement. According to Revenue, the claim of abatement is not sustainable for three reasons. Firstly, the application for abatement is in regard to above period from 01.05.2013 to 15.5.2013. The production was closed actually from 16.4.2013 upto 15.05.2013. This is a continuous period. The appellant has the period falling in April and May into two separate periods. Being a single period of closure of production, the period in the claim is included in the earlier application which has been allowed. Secondly, as per Rule 9 the duty has to be paid within 5th day of every month. The appellant paid the duty for month of May with delay only on 16.5.2013. As the duty was not deposited within the due date the claim of abatement cannot be granted. Thirdly, Rule 10 provides that the assessee has to give intimation to the department at least seven working days prior to the closure of production. That appellant did not comply with this condition.

5. Heard both sides and perused the records carefully. For better appreciation the relevant provisions are noticed as under:

“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 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 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 notified goods shall be effected by the manufacturer except that notified goods already produced before the commencement of said period may be removed within first two days of the said period:

Provided further that when the manufacturer intends to restart his production of notified goods he shall inform to 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”. (Emphasis Supplied)

6. It is not disputed that the machines were sealed and there was no production for the period 16.4.2013 to 15.05.2013. The appellant had paid duty of Rs. 70,00,000/- for the month of April before 5 April. After closure of production, on 8.05.2013 appellant filed abatement of proportionate duty for the period 16.04.2013 to 30.4.2013. This was allowed. The dispute is with regard to the second application filed for the period 01.05.2013 to 15.05.2013. It is the case of Revenue that as the production was closed from 16.04.2013 to 15.05.2013 continuously, the claim period is included in the earlier application itself. This argument does not make any sense. Rule 10 does not use the word ‘single continuous period. It says any continuous period of fifteen days or more’. Abatement can be claimed for the period when there is no production only when duty has been paid. If duty is not paid there is no question of granting any abatement. The appellant had paid the duty for the whole month of April before 5th of April. For the period of closure of production during the month of April, he filed application claiming abatement from 16.4.2013 to 30.4.2013. This was filed on 08.05.2013. At that time the closure was continuing and further the duty of May was not yet paid. It is impossible for appellant to include the closure period in May in that application. He paid duty and thereafter claimed the abatement starting production. The duty being under the compounded scheme the appellant has to pay the entire duty for the whole month of May, if he wishes if he wants to unseal the machines and restart production. His option is only to pay duty and then claim abatement for the period, when there is no production. The appellant has then rightly filed the claim for the period 01.05.2013 to 15.05.2013. The view of the Commissioner (Appeals) that the closure is of a single continuous period and is included in the earlier claim is without any substance. If the argument of the Revenue is accepted, the assessee would put to an artificial restriction of not being able to close down the factory for a period spread over more than a month, which would be absurd.

7. The second ground alleged is that the duty for the month of May was not paid within the due date. It is correct that the appellant has paid the duty with delay only on 16.05.2013. But it was paid with interest and respondent has accepted the same. To claim abatement, Rule 10 lays down only two conditions. First, that there is no production during any continuous period of fifteen days or more. Second, that the manufacturer files an intimation to this effect to the Deputy Commissioner or Assistant Commissioner with copy to Superintendent at least three working days prior to the commencement of the said closure period. There is no condition imposed with regard to date of payment of duty. In fact Rule 9 speaks about the manner of payment of duty. In the second proviso to the said Rule it is stated that if the manufacturer fails to pay duty within due date he shall be liable to pay the duty along with interest. Therefore, the rejection of claim of abatement on this ground is unsustainable.

8. The third ground raised is that appellant ought to have intimated the Department at least seven days prior to the commencement of closure period. As per Rule 10 as it stood during the relevant period the appellant was bound to intimate only three days prior to the commencement of closure. The appellant has complied with the same. The Department cannot alter the notice period provided in the law. Therefore, the rejection of claim of abatement on this ground is also found unsustainable.

9. From the above discussion, I hold that the rejection of claim of abatement is totally unjustified. The impugned order is set aside and appeal is allowed with consequential relief, if any.

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