Tripura High Court
M/S Dharampal Satyapal Ltd ... vs Commissioner Of Central Excise ... on 17 May, 2021
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HIGH COURT OF TRIPURA
AGARTALA
Central Excise Appeal No.01/2018
M/S DHARAMPAL SATYAPAL LTD (Unit-2), Plot No.3450-3453,
Arundhutinagar, Industrial Estate, Agartala, Tripura - 799003, A company
incorporated under the provisions of the Companies Act, 1956 and having its
registered office at 98, Okhla Industrial Estate, Phase - III, New Delhi -
110020 and in the present appeal represented by Mr. Pramod Sharma, the
Deputy General Manager of the Appellant Company.
.............. Appellant(s).
Vs.
COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX,
AGARTALA, Kiran Medical Halls Building, Old RMS Choumohani,
Agartala Tripura, 799 001.
.............. Respondent(s).
Central Excise Appeal No.02/2018
M/S DHARAMPAL SATYAPAL LTD (Unit-2), Plot No.3450-3453,
Arundhutinagar, Industrial Estate, Agartala, Tripura - 799 003. A company
incorporated under the provisions of the Companies Act, 1956 and having its
registered office at 98, Okhla Industrial Estate, Phase - III, New Delhi -
110020 and in the present appeal represented by Mr. Pramod Sharma, the
Deputy General Manager of the Appellant Company.
.............. Appellant(s).
Vs.
COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX,
AGARTALA, Kiran Medical Halls Building, Old RMS Choumohani,
Agartala Tripura, 799001
.............. Respondent(s).
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_B_E_ F_O_R_E_
HON'BLE THE CHIEF JUSTICE MR. AKIL KURESHI
HON'BLE JUSTICE MR. S G CHATTOPADHYAY
For Appellant(s) : Mr. A K Sharaf, Sr. Advocate,
Mr. K Roy, Advocate.
For Respondent(s) : Mr. Paramartha Datta, Advocate.
Date of hearing : 4th May, 2021.
Date of Judgment : 17th May, 2021.
Whether fit for reporting : Yes.
JUDGMENT
( Akil Kureshi, CJ ).
These appeals are filed by the assessee to challenge a common
judgment dated 14th September, 2017 passed by the Central Excise &
Service Tax Appellate Tribunal, Kolkata (hereinafter to be referred to as
"the Tribunal").
[2] The appeals were admitted on the following substantial question of
law:
"Whether in the facts and circumstances of the case, the respondent
was justified in denying claim of the appellant under Chewing
Tobacco and Unmanufactured Tobacco Packing Machines
(Capacity Determination and Collection of Duty) Rules, 2010 merely
for the reason that the officer of the department has failed to mention
about the machine which was made un-operational why could not be
removed for certain reasons, although the same machine was made
un-operational, at a later stage with a report of the officer of the
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department that „looking to the heaviness of the machine, not
possible to remove‟, could be considered to be a substantial
compliance of sub-rule (5) of R.6 of Rules, 2010"
[3] This question arises in following background facts which are
recorded from Central Excise Appeal No.1/2018. Since facts are similar in
both the appeals, they are not separately recorded as arising in Ce. Excise
Appeal No 2/2018 :
The appellant assessee is a manufacturer of Jarda Scented Tobacco
falling under Chapter 24 of the Central Excise Tariff Act, 1985. In terms of
Section 3A of the Central Excise Act, 1944 read with Chewing Tobacco and
Unmanufactured Tobacco Packing Machines (Capacity Determination and
Collection of Duty) Rules, 2010 (hereinafter to be referred to as "the Rules
of 2010") the assessee was liable to pay excise duty on the installed capacity
of manufacture instead of actual manufacture and clearance of goods.
[4] The appellant had installed one machine in its factory which was
sealed and de-sealed at its request by the Excise authorities during the period
between 31st August 2015 to 6th November 2015. According to the appellant,
such machine was operated/not-operated during the said period as under :
"
Period Status No of days the
machine operated
31/08/2015 to 07/10/2015 Not operated Nil
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20/10/2015 to 06/11/2015 Not operated Nil
"
Since there was closure of production at the unit for continuous
period on more occasions than one, the appellant filed a single abatement
claim for the periods between 1st October 2015 to 7th October 2015 and 20th
October 2015 to 31st October, 2015 under Rule 10 of the said Rules of 2010
and claimed that a total of Rs.50,32,548/- was admissible. The Assistant
Commissioner of Central Excise rejected the application by an order dated
1st January 2016 on two grounds namely, the closure of the production
activity at the unit was not for a continuous period exceeding 15 days and
that provisions of Rule 6(5) of the said Rules of 2010 were also not satisfied
since the machine was not removed from the factory.
[5] The appellant filed appeal against the said order. The
Commissioner(Appeals) allowed the appeal in part by an order dated 2nd
September, 2016 to the following extent :
"6.3 On going through the observation the ld. adjudicating authority
and the contention of the appellant I find that the FFS packing
machine under question was sealed and un-installed for the period
from 01/09/2015 to 07/10/2015 and 20/10/2015 to 06/11/2015.
Accordingly, I am of the view that in both occasions/spells machine
was not in operation or did not produce any notified goods for a
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period of 15 days or more though it was in fragmented period falls in
two month."
However, with respect to the assessee‟s claim for abatement for the
period between 1st October 2015 to 7th October 2015, he rejected the claim
on the ground that "the machine was not un-installed and sealed in such a
manner that it cannot be operated as evident from the sealing order dated
31st August, 2015."
[6] To the extent the appeal of the assessee was rejected by the
Commissioner of Appeals, the assessee approached the Tribunal. Tribunal
by the impugned judgment dismissed the appeal making following
observations :
".........................On perusal of the above reports, it is clear that
Superintendent while sealing the packing machines in one case,
categorically mentioned that the machine is sealed in such a manner
that it cannot be operated. But in the other report, it has not been
mentioned categorically. Thus, there is a distinction between the two
reports mentioned above. The ld. Counsel on behalf of the appellant
argued that the sealing of the machines would show that it cannot be
operated. Further, it is contended that there is no material on record
that the sealed machine was operated. I am unable to accept the
contention of the ld. Counsel for the appellant. I find that the report
dated 19.10.2015 is inconsonance with the provisions of proviso to
Rule 6(5) of the Rules, 2010. In the other report, there is no
indication that it cannot be operated. Hence, I agree with the findings
of the Commissioner(Appeals). The ld. Counsel referred to various
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case laws. None of the case laws are relevant in the facts and
circumstances of the present case."
[7] Appearing for the appellant, learned senior counsel Mr. A K
Sharaf took us to the provisions of the said Rules of 2010 and in particular,
sub-rule (5) of Rule 6 thereof. He also drew our attention to the proceedings
drawn by the Inspector of Central Excise on 19 th October, 2015 while
sealing the machine of the assessee which reads as under :
"In pursuance of Order C.No.V(30)02/CL/CE/ACA/2015/4396 dated
14/10/15 of the Assistant Commissioner CE & ST Division,
Agartala, the Sanko Rotary Type Single Track FFS Machine having
identification No.120323479 has been Uninstalled and Sealed on
19.10.2015 at 23-50 hrs. under my supervision and assisted by Sri
Gautam Das Choudhury, Inspector. As the machine is heavy weight
and removal of machine requires quite a large number of skilled
labour and other tools which is not available at this dead hours
of night, the machine is sealed in such as manner that it cannot
be operated. The entire uninstallation and sealing has been in
presence of Sri Pramod Sharma, authorized signatory of Dharampal
Satyapal Ltd.(Unit-2) after observing all necessary formalities."
However, for the period between 1st October, 2015 to 7th October,
2015 the sealing order did not specify that the machine was sealed in such a
manner that it cannot be operated and that it was too heavy to be moved out.
On these grounds, the claim of the assessee was rejected.
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[8] Counsel contented that the Commissioner(Appeals) and the
Tribunal had given the benefit to the assessee of abatement of duty for the
period covered under the sealing order dated 19 th October, 2015 whereas
under substantially similar circumstances, for the sealing order dated 31st
August 2015, such benefit was not granted. He submitted that the machinery
remained the same. In what manner the Inspector of Central Excise should
pass the order of sealing a machine was not within the control of the
assessee. The authority had mentioned that the machine was uninstalled and
sealed in terms of Rule 6(5) which was a substantial compliance of the
statutory requirements. Subsequently, at the request of the assessee, the
machine was de-sealed and there was no allegation by the department that
the assessee had carried out the manufacturing activity despite sealing of the
machine.
[9] On the other hand, learned counsel for the department opposed the
appeal contending that the revenue authorities and the Tribunal have
considered the question in light of relevant facts. There is no error in the
view of the Tribunal. No question of law arises. Appeal may, therefore, be
dismissed.
[10] Section 3A of the Central Excise Act, 1944 pertains to power of
Central Government to charge excise duty on the basis of capacity of
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production in respect of notified goods. Sub-section (1) of Section 3A
provides that notwithstanding anything contained in Section 3 where the
Central Government having regard to the nature of the process of
manufacture or production on excisable goods of any specified description,
the extent of evasion of duty in regard to such goods or such other factors as
may be relevant, he is of the opinion that it is necessary to safeguard the
interest of revenue, specify, by notification in the Official Gazette such
goods as notified goods and there shall be levied and collected duty of excise
on such goods in accordance with the provisions of the said Section, which
essentially envisages collection of excise duty on annual capacity of
production.
[11] To operationalize this scheme, the Central Government has framed
the said Rules of 2010. Rule 10 of the said Rule pertains to abatement in
case of non-production of goods. Relevant portion of Rule 10 reads as under:
"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
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available in the factory for the said period under the physical
supervision of Superintendent of Central Excise, in the manner that
the packing machines so sealed cannot be operated during the said
period."
[12] Rule 6 of the said Rules pertains to a declaration to be filed by the
manufacturer. Sub-rule (5) of Rule 6 reads as under :
"The machines which the manufacturer does not intend to operate
shall be uninstalled and sealed by the Superintendent of Central
Excise and removed from the factory premises under his physical
supervision.
Provided that in case it is not feasible to remove such
packing machine out of the factory premises, it shall be
uninstalled and sealed by the Superintendent of Central Excise
in such a manner that it cannot be operated."
[13] In terms of sub-rule (5) of Rule 6 of the said Rules, the machines
which the manufacturer does not intend to operate would be uninstalled and
sealed by the Superintendent of Central Excise and removed from the
factory premises under his physical supervision. For the period during which
the machine is thus rendered incapacitated, the concerned manufacturer
would be spared the burden of excise duty since the entire levy is based on
installed production capacity and not on actual manufacture or clearance of
goods. The provisio to the said sub-rule provides that in case it is not
feasible to remove the machine, it shall be uninstalled and sealed in such a
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manner that it cannot be operated. In case of the present assessee, as noted,
under an order dated 19th October 2015, the Inspector of Central Excise
recorded that the machine was uninstalled and sealed on the said date under
his supervision. However, since the machine was heavy and removal would
require large number of skilled labourers and the tools which were not
available, the machine was sealed in such a manner that it cannot be
operated. As noted, this order was found sufficient by the
Commissioner(Appeals) to enable the assessee to claim abatement of duty. It
appears that the department has also accepted this order of the
Commissioner(Appeals).
[14] However, for the remaining period, the claim of the assessee is
rejected on the ground that the sealing order did not specify that it was
sealed in such a manner that the machinery cannot be operated. We may
recall, sub-rule (5) of Rule 6 provides that the machine which the
manufacturer does not intend to operate shall be uninstalled and sealed by
the Superintendent of Central Excise and removed from the factory premises
under his supervision. However, the proviso to sub-rule (5) envisages that in
case it is not feasible to remove such machine out of the factory premises, it
shall be uninstalled and sealed by the Superintendent of Central Excise in
such a manner that it cannot be operated. The fact that the machine is too
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heavy to be removed was recorded by the Superintendent of Central Excise
in his order dated 19th October, 2015. Being the same machine, the situation
for a different period, would not change.
[15] It is true that the proviso in such a case requires that the machine
should be uninstalled and sealed by the Superintendent in such a manner that
it cannot be operated. In the sealing order dated 31st August, 2015 that the
Superintendent passed, he may not have used this expression that he had
sealed the machine in such a manner that it cannot be operated. However,
this would not be sufficient for the department to deny the benefit of
abatement to the assessee in terms of Rule 10 of the said Rules. Firstly, it
was the duty of the Excise Superintendent to seal the machine and record it
in the order that it was so sealed that it cannot be operated. In what manner
the Superintendent passing an order after sealing the machine was not within
the control of the assessee. Further, this machine was subsequently de-sealed
at the request of the assessee, at which point there was no allegation that the
seal was broken or that despite the seal the manufacturing activity was
continued. The very purpose of sealing a machine is to keep it out of use and
to render it inoperative. When the Superintendent of Central Excise thus
sealed the machine and also passed an order to this effect, the presumption
would arise that such sealing was in such a manner as that the same cannot
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be operated. In absence of any allegations by the department and any
material on record suggesting that despite sealing the assessee operated the
machine, it would not be permissible to withhold the abatement of duty only
on the ground that the Superintendent of Central Excise did not draw proper
proceedings and did not elaborately record that the sealing was done in such
a manner that the machine could not be operated.
[16] In the result, the question of law is answered in favour of the
assessee. Appeals are allowed by directing the department to give the benefit
of abatement for the periods in question.
The judgment of the Tribunal is reversed. Both the appeals are
disposed of accordingly. Pending application(s), if any, also stands disposed
of.
( S G CHATTOPADHYAY, J ) ( AKIL KURESHI, CJ )
Sukhendu
