Shree FlavourLlp Vs C.C.E. & S.T. (CESTAT Chandigarh)
Conclusion: There was no levy of duty on compounded basis on Tin Packing machine and on pouches which had not been packed with the aid of packing machine, but were packed manually with the help of hand operated fillers or similar manually operated device and sealed with heat sealers/band sealers/candles/hot iron and the like.
Held: The dispute was related to the levy of Central Excise Duty on a Compounded basis, under section 3A of Central Excise Act 1944, on certain “Packing Machines” used for the manufacture of chewing tobacco. The appellants who were using these machines in their Unit which according to them did not qualify as “Packing Machines” in terms of the notification No. 10/2010-CE (N.T.) dated 27.02.2010. The Deputy Commissioner informed that all machines including the Tin machines and the manual machines were covered under the Compound Levy Scheme (CLS). In response to the appellant’s response, the Deputy Commissioner informed that there was no levy of duty on a compounded basis on the Tin Packing machine and on pouches which had not been packed with the aid of the packing machine. It was held that the Deputy Commissioner informed that the department had re-examined the issue and that there was no levy of duty on compounded basis on Tin Packing machine and on pouches which had not been packed with the aid of packing machine, but were packed manually with the help of hand operated fillers or similar manually operated device and sealed with heat sealers/band sealers/candles/hot iron and the like. No specific action was taken by Deputy Commissioners against the impugned machines by way of demanding duty under Compound Levy Scheme (CLS) or otherwise. It appeared that the appellants had a bonafide belief that they were not covered under compounded levy scheme in respect of the disputed machines. The Deputy Commissioners also was aware of the facts. Revenue had raised the issue of admission of liability before Settlement Commission. There was no any case of revenue on merits it did not matter if appellants had admitted any liability before the Settlement Commission or not.
FULL TEXT OF THE CESTAT CHANDIGARH ORDER
These appeals are filed by
1. Shree Flavour LLP
2. S K Aggarwal
3. P V Subramanian
4. Yogesh Arora
5. Sharad Chaudhary
6. Vipin Kumar Aggarwal
7. Shri Gopal Gupta
8. Manoj Gupta
against demand of Central Excise Duty and imposition of penalties.
2 The facts of the case are that the appellants were engaged in the manufacture and packing of chewing tobacco in pouches and tins falling within tariff item 2403 99 10 of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) (for brevity „the Tariff Act‟). The dispute relates to levy of Central Excise Duty on Compounded basis, under section 3A of Central Excise Act 1944, on certain„Packing Machines‟ used for manufacture of chewing tobacco. The appellants were using these machines in their Unit which according to them do not qualify as „Packing Machines‟ in terms of the notification No.10/2010-CE (N.T.) dated 27.02.2010, whereas the revenue in the impugned order held that the said machines are „Packing Machines‟.
2.1 The Central Excise duty is normally levied on the goods manufactured. The actual quantity of goods is measured and duty is charged on actual manufacture of goods under Section 3 of the Central Excise Act. The Central Government is empowered by virtue of Section 3A of the Central Excise Act 1944 (CEA) to levy duty on the „Deemed Production‟ where ever it considers it necessary in the interest of revenue. The said section 3A empowers the Government to notify the goods on which the Central Excise Levy will made on the basis of Deemed Production. The product manufactured by the appellants was notified under Section 3A of the Central Excise Act, 1944 vide notification No.10/2010-CE (N.T.) dated 27.02.2010. To determine what constitutes a „Packing Machines‟ and what shall be the capacity of such „Packing Machine‟ the government notified Chewing Tobacco and Unmanufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010 (for brevity „Capacity Determination Rules‟) as amended effective from 08.03.2010.The rule 2(d) of the said rules described the “packing machine” as follows:-
2(d) ―packing machine‖ includes all types of Form, Fill and Seal (FFS) Machines and Profile Pouch Making Machines, by whatever name called, whether vertical or , with or without collar, single track or multi-track and any other type of packing machine used for packing of pouches of notified goods;
Rule 5 of the said rules prescribed the deemed production, based on number of machines and the MRP of the pouches packed. It is seen that the capacity of production is also determined by the MRP of the product manufactured. After determination of Deemed Production the duty liability was determined vide notification 16/2010-CE dated 27.2.2010
2.2 In short the scheme of the compounded levy is such that for each packing machine the deemed production is determined in terms of the Capacity Determination Rules. The total deemed production of each machine is measured in terms of „Capacity Determination Rules‟. For an assessee total duty amount is based on the number of machines installed/used in the factory and also the MRP of the pouches manufactured on such machines. Duty is levied on the number of machines installed/used. The sole criterion for the determination of total duty payable is the number of “Packing machines” installed/used and the MRP of the pouches manufactured on respective machines.
2.3 In the instant case the dispute relates to rate of duty applicable to certain machines used by the appellants. Based on the investigations conducted, a Show Cause Notice dated 21.07.2011 was issued to the appellants, Directors and employees of the appellants proposing a demand of Rs.250.12 Crores under Rule 19 of the Capacity Determination Rules read with Section 11A(1)of the Actalong with interest under Section 11AB of the Act, besides proposing penalty under Section 11AC of the Act read with Rule 18 of the Capacity Determination Rules and Rule 25 of the Central Excise Rules, 2002. SCN also proposed confiscation of three machines and the goods seized valued at Rs.2.31 Cr.Besides, penalty under Rule 26 of the Rules read with Rule 19 of the Capacity Determination Rules, was also proposed on Sh. Manoj Gupta, Director, Sh. Sharad Chaudhary, Director, Sh.Vipin Kumar Aggarwal, Director, Sh. S.K. Aggarwal, Director, Shri ShriGopal Gupta, Chairman of Copal Corporation Ltd. and Gopal Group of Companies, Sh. Yogesh Arora, General Manager (Purchase) and Sh. P.V. Subramaniam, Manager (Purchase).
3. Learned Counsel for the appellant submitted that there are 2 main issues to be decided by Tribunal:
(i) Whether the 3 machines under reference qualify to be “packing machine” as envisaged under the Chewing Tobacco and Unmanufactured Tobacco packing Machines (Capacity Determination and Collection of Duty) Rules, 2010?
(ii) Whether there was any suppression of facts on the part of the Appellant to evade duty so as to invoke extended period of limitation?
3.1 Learned Counsel argued that the appellants are engaged in manufacture of Flavored Chewing Tobacco falling under Chapter 24 of the First Schedule to the Central Excise Tariff Act, 1985. The products are cleared in Pouches, P.P. Jars and Tins, in various pack sizes. Ld counsel pointed out that they possess fully automated Form, Fill and Seal (FFS) machines where the speed of the machine vary from 300 plus pouches per minute and goes above 450 pouches packed in one minute. They also possess manually operated machines, which work on electricity or pneumatic power and wherein:
(i) Pre-formed pouches are obtained from the outside the Unit;
(ii) Pre-formed Pouch is hand held by the worker below the nozzle of the machine;
(iii) Upon pressing of the pedal by the worker manually, an estimated quantity of the product is dropped in the pouch hand held by the first worker;
(iv) The filled pouch is handed over to the second worker;
(v) The second worker then weighs the pouch on a weighing scale and corrects the weight of the pouch either by taking out or putting in the product in / from the pouch by the aid of a spoon by hand;
(vi) The weighed pouch is handed over to the third worker who uses a heat sealer (which uses electricity for generating heat) to enable hot sealing or by guiding the pouch on a band sealer (which again uses electricity to generate heat) to enable sealing, and the pouch is sealed.
Learned counsel argued that by the above process the pouch is manually packed. Therefore, from the above discussion and description, we can easily observe the difference between the automatic FFS machine and Manual Machines.
3.2 Learned Counsel pointed out that notification No.10/2010-CE (N.T.)dated 27.02.2010, notified following goods under Section 3A
(i) unmanufactured tobacco, bearing a brand name, falling under tariff heading 2401 of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986); and
(ii) chewing tobacco falling under tariff item 2403 99 10 of the said Tariff Act,
manufactured with the aid of packing machine and packed in pouches as notified goods, on which there shall be levied and collected duty of excise in accordance with the provisions of the said section 3A.
He argued that there are three essential ingredients for a product to qualify as the notified/specified goods:
(i) it must be “Chewing Tobacco” falling under the prescribed Item number;
(ii) it must be “Manufactured with the aid of packing machine”; and
(iii) it must be “Packed in pouches”.
Learned Counsel pointed out that these three conditions must be collectively satisfied for the product to qualify as a “specified goods” for the Compound Levy Scheme to be applicable. Learned Counsel pointed out that the product of the Appellant is “Flavored Chewing Tobacco” and packed in pouches.
3.3 Learned Counsel pointed out that the Notification explain the meaning of „Packing Machines‟ as under:
“Packing Machine” includes all types of Form, Fill and Seal (FFS) machines and Profile Pouch Making Machine, by whatever names called, whether vertical or horizontal, with or without collar, single-track or multi-track and any other type of packing machine used for packing of pouches of notified goods”
Learned Counsel pointed out that the packing machines contemplated, for the purposes of such levy under section 3A, are:
(a) Form, Fill and Seal machines; AND
(b) Profile Pouch making machines;
by whatever name they are called and in whatever form they may be – whether vertical or horizontal or any other type – used for the packing of the pouches. Learned Counsel argued that for a machine to qualify as „Packing Machine’ the entire process of packing – i.e., from forming the pouch to its filling and then sealing – has to be performed in an integrated sequential manner by the said packing machine.
3.4 Learned Counsel pointed out that in case of FFS machines, all activities from formation of pouch from the paper roll in the machine, filling of the pouches with the product, sealing of the open end of the pouch after it is formed and filled is done in continuous process. Ld. Counsel argued that the machine should have all the three functions as a continuous and synchronized process i.e. forming the pouch, filling the pouch and thereafter sealing the pouch, so as to qualify as packing machine under the Compound Levy Scheme. Ld. Counsel argued that whenever the machine did not perform all these three functions, it cannot be considered as Packing Machine, under the Compound Levy Scheme. Learned Counsel pointed out that out of three machines in dispute, two machines only perform the function of Filling and nothing else. The said two machines neither form the pouch,pack the pouch or seal the pouch.
3.5 Learned Counsel argued that the Department’s contention that because the devices installed by the Noticee uses electricity hence they are packing machines, is completely baseless. Learned Counsel pointed out that Board vide File No. 341/24/2010-TRU, dated 05.03.2010, clarified that the Compound Levy Scheme covers notified goods manufactured with the aid of packing machines and packed in pouches. Further, there was no intention to levy duty on compounding basis on pouches which had not been packed with the aid of packing machines but are packed manually with the help of hand operated fillers or spoons or a similar manually operated device and sealed with heat sealers / band sealers / candles / hot iron and the like. Learned Counsel pointed out that nothing in the above clarification specifies anything about electricity. The Central Government in its clarification has specifically excluded “pouches packed manually with the help of hand operated fillers or spoons or a similar manually operated device and sealed 5 with heat sealers / band sealers / candles / hot iron and the like” knowing well, that the heat sealers/band sealers itself uses electricity for their operation and still have been specifically excluded from the said the Compounded Levy Scheme.
3.6 Learned Counsel pointed out that the term “packing” or “packed” has not been defined under the Notification or the Capacity Determination Rules.Learned Counsel argued that “Packing” or “packed” in common parlance would mean something which is presented in a manner where it is ready for delivery to its target audience. With respect to the product in question, it would mean being secured in a manner such as would preserve the product in its present form during transportation, storage, distribution and finally sale to its consumer. In effect, a containment that would preserve or enhance the shelf life of the product. Ld Counsel argued that a pouch will be a “packed pouch”, if, and only if, it is sealed and secured from all sides. A pouch, filled with the product, but not sealed and having an open end will not qualify to be a “packed pouch”. Sealing, so as to secure and protect the product from spilling, contaminating, preserving its quantity and quality, is an intrinsic part of the process of packing. He argued that merely filling the pouch with the aid of a machine will not suffice. Ld Counsel pointed out that the entire packing process indicated above would amply demonstrate that the sole purpose of all the three Impugned Machines is only, and only, filing of the product in the pouches. None of the three Impugned Machines seals the pack and therefore, concludes the process of packaging. Open ended, filled pouches are not packaged pouches.
3.7 Learned Counsel argued that Condition Nos. 2 and 3 of the Notification are not satisfied by the product being manufactured by the Appellant and hence, the product of the Appellant is not “specified goods” under and in terms of the Notification. As such, the product of the Appellant does not qualify for assessment under the Compound Levy Scheme.
3.8 Learned Counsel pointed out that the three machines of the Appellant that are under dispute are as below:-
1. Filler machine (1 Kg)
2. Filler machine (500 gms)
3. Pedal Filler and Heat Sealer machine (10 gms)
Learned Counsel argued that the first two machines, are only filler machines (1 kg and 500 gms) on which the following 3 steps are performed –
1. Pre-formed pouches are procured from external sources and are not produced in the factory.
2. These procured pre-formed pouches are held below the hopper by the first worker.
3. On pressing the pedal by the worker, the electricity is triggered which rotates the disc on the hopper from which tobacco is dropped in the pouch due to pneumatic pressure.
The role of these 2 machines ends over here. It has no provision to perform any function like weighment or sealing/packing of pouches. Learned Counsel pointed out that the third machinewhich is the pedal and heat sealer machine is used for filling of 10 gm of Flavored Chewing Tobacco. The machine has a frame with hoppers attached on its sides. Learned Counsel pointed out that following 6 steps are to be performed before sealing the pouches –
1. Pre-formed pouches are procured from external sources and are not produced in the factory.
2. These procured pre-formed pouches are manually held below the hopper by 1st worker. (There are total 4 hoppers in the said machine).
3. On pressing the pedal by the worker, the electricity is triggered which rotates the disc on the hopper from which tobacco is dropped in the pouch due to pneumatic pressure.
4. The filled pouch is passed onto 2nd worker which weighs the pouch by putting it manually on a weighing scale.
5. Weight of the pouch is manually adjusted by the 2nd worker as per the required quantity, either by putting in or by taking out tobacco out of the pouch manually.
6. Once the weight is checked, the filled pouch is manually passed onto the 3rd worker for sealing.
This pouch is manually placed by the 3rd worker between the band sealer on the side of the filling unit (which is run on electricity) to seal the pouch. The band/heat sealer had been welded on the same machine by the Appellant for the convenience and efficiency of the workers only. On the said band sealer, the worker guides the open end of the pouch between the band sealer to seal the same, as an independent and separate process manually. The band/heat sealer can be used for sealing the pouches even without using the filler machine. Learned Counsel pointed out that the above-described process, stands verified and validated by:
(a) visits by the Department Officers;
(b) the YMCA Report
(c) the IIT Delhi Report and
(d) the Technical Report submitted by the Appellants before the Department
Learned Counsel pointed out that this is the broad description provided in the Show Cause Notice too.
3.9 Learned Counsel argued that the activity of filling of pre-formed pouches, its weighment and sealing are mutually exclusive and independent. Both the processes of filling and sealing on this machine are independent of each other and happen as two separate processes. Even an individual single process out of the two can also be done on the said machine as both the said processes are not continuous, synchronized and inline, but are separate and independent of each other. The third machine cannot under any circumstance be described as an automatic machine as the pouch cannot go to the band sealer for sealing of its own. Further, this band sealer has been exempted from Compound Levy Scheme vide Board clarification dated 05.03.2010.
3.10 Learned Counsel argued that the goods are not packed with the aid of any packing machine as envisaged in the Notification or the Circular. The two machines used in the factory is only for filling (Filler Machine) the procured pre-formed pouches. In the above given process, all the 6 steps are done manually by the worker and only in 2 steps i.e. during rotation of the disc in Step 1 and sealing of the pouch by heat sealer in Step 6, electricity is used. So, the ratio of manual working viz-z-viz electricity used is 6: 2. Hence, in no way can above machine be said to be an automatic machine which had been brought under Compounded Levy Scheme by the Department with an intention to levy duty on deemed production. He argued that the Department has erred in arriving at a conclusion that since the machines under reference uses electricity or pneumatic pressure, so they are packing machines, without appreciating its actual working. Further the clarification issued by the Board dated 05.03.2010 does not say that to be out of the purview of Compound Levy Scheme, the machine should not be using electricity. He argued that these devices do not perform the three functions of forming, filing and packing the pouches. They perform only one of the three mandatory functions – namely, filling. They do not form the pouch – which are externally purchased. They do not weigh the quantity of the product – which is again performed on a separate device. And, they do not seal or complete the packing process – which is again performed on a separate device. Thus, while these devices under consideration are used in one of the steps in the entire process of packing, they do not initiate the process of packing nor do they conclude the process of packing. They only perform one of the steps in the process of packing.
3.11 Learned Counsel argued that Under Rule 6, Declaration as prescribed in Form-1 is to be filed. The said Declaration inter alia requires the manufacturer to declare „the name of the manufacturer of each of the packing machine, its identification number, date of its purchase and the maximum packing speed at which they can be operated for packing of pouches of notified goods, with lime tube and without lime tube, of various retail sale prices‟. The Form 1,interalia, requires declaration of maximum speed of packing pouches at which it can be operated, again which can only be in case of fully automated FFS machine and not in case of machines which are run by human intervention. Learned Counsel argued that the machines under reference cannot run without human intervention and the output of the same depends on the efficiency of the individual worker. The rules also fix the number of pouches of respective Retail Sale Price, deemed to have been packed during the month on the packing machines covered under the Compound Levy Scheme, which can only be packed using FFS machines, which works with no human intervention. This deemed production mentioned in notification is impossible to be achieved on machines which work with human intervention, where the output is dependent on the efficiency of worker and not of the machine. This fact is substantiated by the fact that Union Government have further incorporated slabs with machines having various speed, like Packing Machine having speed up to 300 pouches per minutes, Packing Machines having speed from 301 to 450 pouches per minutes and Packing Machines having speed above 450 pouches per minute. The duty slabs for the respective speed slabs and its deemed production have also been fixed accordingly. As is evident from the above paras, the machines contemplated under Chewing Tobacco Rules are the machines which has definite speed and capacity to pack pouches numbering as high as 300 pouches or even more in a minute. Such a capacity is possible only in a machine which is fully automated and perform all three functions i.e.Form, Fill and Seal of the pouches and not by the Filler & Sealing Machines under reference, which are run by human intervention at all the levels and output of which is dependent on the efficiency of the workers.The capacity is totally dependent on the efficiency of the individual worker in question and is nowhere near the deemed production fixed under the Compound Levy Scheme. Learned Counsel argued that these cannot be machines intended to be covered under the Chewing Tobacco and Unmanufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010, as the Capacity of the machines under reference cannot be determined. It is further evident that the legislation has no intention to cover these impugned machines, which don’t have any definite output or speed to fix the deemed production of the same and its duty payable thereof.In this regardLearned Counsel relied on the following decisions:-
(i) The Hon’ble CESTAT in case of COMMISSIONER OF CENTRAL EXCISE, UDAIPUR Vs. M/s MIRAJ PRODUCTS PVT LTD reported at 2018-TIOL-427-CESTAT-DEL has specifically held in Para 7 of the said Order-
“7. We have examined the provisions of Chewing Tobacco Rules, 2010. Rule 5 of the said rules 10 which determines the quantity of production based on the capacity of the machine as well as read with the Notification number 16/2010 makes it clear that the notified goods are goods which are for retail sale produced by using packing machines, as per the table mentioned therein. The explanation 5 in the notification makes it abundantly clear that for the purpose of said notification ‘Filter Khaini means chewing tobacco which is packed in sachets of filter paper or fabric before being packed in pouches with the aid of packing machines’. The contention of the revenue is that the aid of packing machines should be for sachet and not for pouch. We are not able to appreciate such interpretation of the explanation. A plain reading of the explanation shows that packing in pouches should be with the aid of packing machines. In this contention, we also refer to clarification issued by the board vide letter dated 53/2010. It was categorically clarified that packing of pouches of notified goods and further filling with the help of manual process will not attract the Chewing Tobacco Rules and duty will be leviable in terms of Section 3 only.“
(ii) The Hon’ble CESTAT in case of COMMISSIONER OF CENTRAL EXCISE, CHANDIGARH Vs. M/s TEJ RAM DHARAM PAUL reported at 2013-TIOL-1192-CESTAT-DEL (2013(297)ELT 0125 (Tri.- Del.)) has categorically held in Para 14 as under-
“14. After taking into consideration the entire facts he has held that in terms of Explanation 5 and the clarification given by the Board he came to conclusion that Section 3A covers only pouches packed with the aid of packing machine and not the pouches that are packed manually. Inasmuch as the plastic pouches, in the present case, are pre-sealed and zipped from one side and the sachets are put in manually and the pouch is sealed with the help of hot iron/band sealer, it cannot be said that the plastic pouches are packed with the help of packing machine.“
From the above referred judgments, Learned Counsel argued that it is very clear that the Compounded duty can only be levied when „Notified Goods’are packed in pouches with the help of „Packing Machine’.
3.12 Learned Counsel argued that the reports of technical experts obtained by Department shows that they admitted that impugned machines are not automated machines. Further, two (2) of the said machines have no provision to seal the pouch at all and the third one has a band sealer as a separate process. Learned Counsel argued that the Technical experts were to study the working of the machines, but instead they gave their opinion on the legal point. It was for this reason that the Appellant sought the cross-examination of the experts, but the same wasdenied by the Department. Learned Counsel argued that the technical report calling the impugned machines as “Packing Machines” cannot be relied upon.
3.13 Learned Counsel argued that that the unit of the Appellant had been visited by the officials of the Department on numerous occasions‟ right from March, 2010 till July, 2010 and the officials carried out several rounds of inspection to study the nature and working of the machines under reference. Ld counsel explained in details the correspondence between them and the department. He also gave details of the visit made by various officers
3.14 Learned Counsel argued that the Appellant was using manually operated machines, using electricity at the time of notification of Rules. That the machines in questions, were acquired in July, 2009. Learned Counsel argued that an intimation had been duly given to the Department under Rule 31 of the Central Excise Rules, 2002 vide letter, dated 22.07.2009 and 23.07.2009. This intimation was given to the Department in terms of Circular No. 854/12/2007 dated 07.09.2007 wherein in Para 2.4 it is stated:
“In case, the unit brings any new filling and packing machine into the factory, the intimation should be filed before 24 hours of bringing in the said machine.”
Even in the said letters the Appellant described the machines as manual machines. These machines were procured by the Appellant even before the Compound Levy Scheme was conceptualized.
3.15 Learned Counsel argued that the Adjudicating Authority, while rejecting the plea of the Appellant on invocation of extended period, has not referred to the various visits by the Official of the Department for physical verification of the impugned machines, more specifically the visit by the Preventive wing of the Department dated 21.05.2010 and also the various correspondence exchanged giving the nature and working of the impugned machines, more specifically the letter dated 25.05.2010 written by the Appellant, which was already there on record. The letter dated 2nd March, 2010 and filing of declaration dated 5th March, 2010 along with the covering letter, duly acknowledged by the department clearly shows that 2 of the machines under reference were duly informed by the Appellant. The letter dated 5th March categorically says that these 2 machines are not covered under Compound Levy Scheme (CLS) and also the fact that the Appellant will be using these machines, being out of the purview of theCompound Levy Scheme(CLS). The 3rd machine was received by the Appellant later, for which due prior intimation vide letter dated 22nd March, 2010 was given by the Appellant in terms Clause 2.4 of the Board Circular No. 854/12/2007 dated 07.09.2007. In the Intimation dated 22.03.2010 in one of the Invoices, the seller of the machine mentioned the machine as Packing Machine in the Head Note but the Head Note was further clarified and the machine was further described as Dosing Filling System. Therefore, even the Third Machine was not the Packing Machine and also been duly intimated to the Department in terms of Circular No. 854/12/2007 dated 07.09.2007. Further, it is not the case of the department, nor has it been alleged in the Show Cause notice that any of the 3 impugned machines was found to be illegal or unaccounted. Further, the letter dated 8th March, 2010 of the Deputy Commissioner, wherein he says that all machines including the Tin machines and the manual machines are covered under the Compound Levy Scheme (CLS), clearly shows that the department were aware of the impugned machine. Learned Counsel argued that the Appellant duly replied to the Deputy Commissioner‟s letter dated 8th March, 2010, informing that the impugned machines are not covered under the Compound Levy Scheme (CLS). The Appellant further vide its letter dated 15th March, 2010 duly informed the working of the machines under reference. It is submitted that on the letters of the Appellant dated 8th March & 15th March of 2010, the Deputy Commissioner wrote a letter dated 17th March, 2010 to the Appellant, wherein he informed that the department has re-examined the issue and that there is no levy of duty on compounded basis on Tin Packing machine and on pouches which have not been packed with the aid of packing machine, but are packed manually with the help of hand operated fillers or similar manually operated device and sealed with heat sealers/band sealers/candles/hot iron and the like. The Deputy Commissioner never disputed the averment of the Appellant given in its letter dated 10th March, 2010 that these machines are not covered under Compound Levy Scheme (CLS). Neither the Deputy Commissioner asked the Appellant to declare the said machines and/or pay duty on the same underCompound Levy Scheme (CLS).
3.16 Learned Counsel argued that another issue highlighted in the Show Cause Notice is about the change of the nomenclature of one machine from “Sealer (Pedal Operated)” to “Pedal Operated Filler”. This was also duly explained during investigation as is given at wherein the statement of the Purchase Manager Mr. P.V. Subramanian is given. In response to Question 1 therein, he has categorically stated that as the description on the bill was wrongly given as “Sealer (Pedal Operated)” instead of “Pedal Operated Filler”, it was duly corrected. In fact, it was to done to make the description of the machines more clear and better, from a mere Sealer to Filler. It is also undisputed fact that the Appellant duly filed the requisite statutory declarations, forms, return on or before the due date and duly maintained the statutory records and kept the Department informed of all the facts. The Appellant was not required to give any declaration in the aforesaid Form-I as the Appellant from the Day 1 is of the view that the said machines are manually operated machines and the said Declaration was required to be filed only in respect of FFS machines.
3.17 Learned Counsel argued that the fact that there is no fraud, collusion, wilful misstatement of facts or suppression of facts on the part of Appellant or co-Appellant(s) with the intent to evade duty is substantiated by the observation of all the three members of the Hon’ble Settlement Commission, whom the Appellant approached to buy peace. All the three members of the Hon’ble Settlement Commission unanimously agreed and observed that there is no suppression of facts on the part of the Appellant at all so as to invoke the extended period. All the declarations were duly filed by the Appellant, informing about the machines under reference giving its working in detail, duly acknowledged by the department, a fact, which is undisputed. Learned Counsel argued that theSettlement Commission in their Final Order No. F-1111/CE/12-SC(PB) dated 03.09.2012, the majority opinion at the end of Para 34 have specifically held-
“Thus, there is no suppression of facts regarding nature and working of 3 machines on the applicant‘s part‖
3.18 Learned Counsel argued that perusal of the above chronology of communications and visits by the Department clearly shows that the Department in this case had the knowledge from the very beginning about the machines under reference, therefore, the extended period cannot be invoked by the Department and the period beyond one year from the date of Show Cause Notice is barred by limitation. The only period which falls within limitation is the starting from the 1st of July, 2010 till 24th of July, 2010. The Appellant in support of the above view places reliance on the following judgments:
