The Ahmedabad bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT)upheld the refund allowed under rule 16 of Pan Masala Packing Machine Rules as it applies to a Private ltd entity Transferred from Partnership after the closure of the old business.
Vishnu Packaging, the respondent is a manufacturer of Pan Masala, falling under Chapter 24 of the Central Excise Tariff Act, 1985, and is working under a compounded levy scheme, according to which the respondent has to pay the duty on several pouch packing machines, installed and working during the month as governed under Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008.
The respondent had paid duty amounting to Rs. 11,25,00,000/- for June 2011 for the goods viz “Pan Masala Containing Tobacco (Gutkha)” having a maximum retail price of Rs. 2/- per pouch and Rs. 5 per pouch in respect of 25 pouch packing machines. As the respondents were working under a compounded levy scheme, they were required to pay the duty on several pouch packing machines (PPMs), installed and working during the month.
The respondent was required to pay a total duty of Rs. 11,25,00,000/- for all 25 PPMs installed and in working condition in their factory during June 2011. Accordingly, they paid a central excise duty of Rs. 11,25,00,000/- in June 2011. The respondent thereafter filed a refund claim amounting to Rs. 2,25,00,000/- online before the Jurisdictional Assistant Commissioner for the amount of duty paid in respect of 25 pouch packing machines, which were closed and sealed during the period from 25.06.2001 to 30.06.2011 i.e. for 6 days.
The refund sanctioning authority vide Order In-Original dated 06.09.2011 sanctioned the refund claim to the respondent under Rule 16 of Pan Masala Packing Machine (Capacity Determination and Collection of Duty) Rules, 2008 read with Section 11B of the Central Excise Act 1944. Being aggrieved by the refund order, revenue filed the appeal before the Commissioner (Appeals), who vide the impugned order upheld the order of lower authority and rejected the appeal filed by the department.
Shri Rajesh Nathan, Assistant Commissioner (AR) appearing on behalf of the Revenue reiterated the grounds of appeal and submitted that Rule 16 of the act states that the same would apply in a case where the manufacturer permanently ceases to work in respect of all the machines installed in the factory and who has filed intimation for surrender of registration. In the instance case, the manufacturer was M/s Vishnu Packaging (Unit -2). The said manufacturer changed the constitution of their firm into a private limited company with effect from 21.06.2011. The said assessee filed intimation for sealing of their pouch packing machines on 22.06.2011, accordingly all the 25 PPMs were sealed from midnight of 24/25.06.2011.
It was argued that in the present matter Rule 16 would not be applicable and the Refund granted under the said Rule was not proper. The respondent had not permanently ceased to work as required in Rule 16. They continued the manufacturing activity in the same factory premises on the same set of machines, soon after the change in their constitution. On the other hand, Shri N.K. Tiwari opposed the contention of the revenue and reiterated the finding of the impugned order.
It was evident that with effect from 25.06.2011, the manufacturers were compelled to stop their manufacturing activities and there is no dispute that all the machines were sealed at midnight of 24-06-2011 by the department and hence there could not be the manufacture of any gutkha from 25-06-2011 onwards.
A two-member bench comprising Mr. Ramesh Nair, Member (Judicial), and Mr. C L Mahar, Member (Technical) observed that there is a clear distinction between the ownership of a partnership firm and a Private Limited Company. Therefore even if a partnership firm ceased its operation and in place of the same a Private Limited Company started operation, both being separate legal entities, it cannot be said that the partnership firm has not ceased its production permanently. It’s very obvious that when one entity closed its production and surrendered the registration and a new entity obtained a fresh registration with a new PAN, the former entity became non-existent and its closure of production falls under the term “permanently”.
The CESTAT held that the case is clearly covered under Rule 16 of the Rules and consequently the respondent is legally entitled to the refund of duty. The Tribunal upheld the impugned order and dismissed the appeal.
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