The Ahmedabad bench of the Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ) has held that demand of duty is not permissible when no misdeclaration under Pan Masala Packing Machines Rules, Demand of duty not permissible.
Chandan Tobacco Co, the appellant is engaged in the manufacture of Pan Masala and Pan Masala containing Tobacco (Gutka) falling under Chapter Sub–headings No. 21069020 and 24039990 of Central Excise Tariff Act, 1985.
The departmental officers of HPIU-V gathered various intimation/permission letters submitted by the assessee and the reports/ other relevant records from the jurisdictional Division Office, Jurisdictional Range office, as well as from the assessee, to investigate the correctness of the self–assessment and central excise duty payment made by the assessee.
It appears during the course of the investigation that the Appellant has submittedintimation/permission letters and filed a declaration in Form-1 on 09.04.2009/16.04.2009 with the Deputy Commissioner, Division –II, Silvassa and endorsed copies of the same to the Range office, in terms of Rule 6 (6) of the Pan Masala Packing Machines (Capacity Determination and Collection of Duty), Rules, 2008 for the addition of some new packing machines during the period of April -2009, June -2009 and July -2009 respectively, for the manufacture of the aforesaid products.
The Appellant also paid a differential Central Excise Duty amount of Rs. 3,25,000/- in respect of two packing machines, converted from Pan Masala to Pan Masala Containing Tobacco (Gutka) during the Month of July 2009 on a pro rata basis from the date of conversion.
Further, it appeared that the Appellant submitted a revised declaration in Form-1 on 05.09.2008, 19.05.2009 with the department as per Rule 6(6) of the Pan Masala Packing Machines (Capacity Determination and Collection Duty), Rules, 2008 for “replacement” of some existing packing machines during the month of September 2008, February-2009, May -2009 and June -2009 respectively for the manufacture of aforesaid products.
Ashow cause notice dated 30.09.2009 was issued for the demand of Central Excise Duty under the provisions of Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 and under Section 11A(1) of the Central Excise Act, 1994 along with interest and also for penalties.
It is evident that the number of installed machinesin the month remained the same before and after the replacement of the machines. Therefore, the demand confirmed by the Commissioner is legally not correct.
A Coram consisting of Mr Ramesh Nair, Member (Judicial) Mr Raju, Member (Technical) observed that the Revenue has issued a show cause notice demanding duty without challenging the correctness of the said orders fixing the annual capacity of the production of Appellant. In the case of M/s Forbos Industries (Supra) and Sulekhram Steel Ltd. (Supra),it was held that “order fixing production capacity based duty is an appealable order.”
While allowing the appeal, the Tribunal held that the Revenue cannot demand duty unless the orders of determination of production capacity-based duty have been reviewed and set aside the impugned Order.
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