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
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 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 :
