Abatement of duty cannot be withheld for failure of Excise Superintendent to draw proper proceedings

Dharampal Satyapal Ltd. Vs Commissioner of Central Excise and Service Tax (Tripura High Court)

In terms of sub-rule (5) of Rule 6 of the Chewing Tobacco and Unmanufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010, 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 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).

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 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.

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 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.

FULL TEXT OF THE JUDGMENT/ORDER OF TRIPURA HIGH COURT

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