The Allahabad bench of Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that no excise duty is demandable in the absence of evidence to establish the use of the machine for packing gutkha. The CESTAT viewed that the demand of duty was contrary to the declaration filed along with the ground plan, which is required in terms of Pan Masala Packing Machines (Determination of Capacity and Collection of Duty) Rules, 2008
M/s Simla Food & Flavours, the appellant is a manufacturer of Pan Masala containing tobacco called ‘Gutkha’ under the brand name of ‘Gomti’ classifiable under sub-heading No.24039990 of the first schedule to Central Excise Tariff Act, 1985 of the Retail Sale Price of Rs.1.00 per Pouch. W.e.f. 01.07.2008 appellant has been discharging the duty on the compounding basis as per the provisions of Pan Masala Packing Machines (Determination of Capacity and Collection of Duty) Rules, 2008 as per the goods prescribed under Notification No.41/2008-CE dated 01.07.2008.
The appellant filed a declaration on 10.07.2008 in Form-I showing that 6 (5+1) packing machines were operational during July 2008 and that the appellant was manufacturing Gutkha and sweet supari. Clearly showing that one pouch packing machine was kept separately in another room, while 5 packing machines for packing Gutkha were kept in another room of the factory.
The Deputy Commissioner, Central Excise Division-I Lucknow determined that 9 machines were shown to be available and installed in the factory under the compounded levy scheme.
Deputy Commissioner, Central Excise, found that there were 9 machines installed in the factory. Subsequently, three machines were sealed on 03.07.2008. Deputy Commissioner after verification approved the installation of 9 machines on 01.07.2008 being maximum number of machines available in a factory from 01.07.2008 and the retail sale price of notified goods was Rs.1.00.
Taking 9 machines installed in the factory and rate of duty per packing machine per month as Rs.12.5 lakhs, appellant was required to pay duty of Rs.1,12,50,000/- during the month of July, 2008 whereas they discharged duty liability of Rs.62.50 lakhs only. Accordingly, they were issued with a show cause notice demanding tax under Section 11A of Central Excise Act, 1944 along with interest and Penalty under Rule 17 of the Pan Masala Packing Machines (Capacity Determination And Collection of Duty) Rules), 2008 read with Rule 25 of the Central Excise Rules, 2002,
Appellant has contended that out of six pouch packing machines 5 were installed in a common room and one machine is used for packing sweet supari was installed in the separate room.
Further in their declaration, they have stated that out of six machines available in their premises 5 were being used for packing of Gutkha and one was used for packing sweet supari. No findings has been rendered by the Commissioner taking into account the ground plan and the form-I filed by the appellant during the relevant time. The whole dispute is in respect of one pouch packing machine that was installed in separate room as per the ground plan and used for packing sweet supari. We find that no evidence has been produced by the revenue to establish that this machine was being used for packing Gutkha.
A two member bench comprising of Mr P K Choudhary, Member (Judicial) and Mr Sanjiv Srivastava, Member (Technical) observed that all the evidences produced in form of declaration, ground plan and correspondences show that the machine was installed in the separate room and was used only to pack sweet supari.
The CESTAT viewed that the demand of duty was contrary to the declaration filed along with the ground plan, which is required in terms of Pan Masala Packing Machines (Determination of Capacity and Collection of Duty) Rules, 2008 and set aside the same while allowing the appeal.
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