Interest not leviable if differential duty paid by 5th of following month under Packing Machine Rules, 2008

[Arising out of Order-in-Appeal No.35-39/SM/CE/D-II/14, dated 30.07.2014 passed by the C.C.E.(Appeals), Delhi-II]

 Brief of the case:

• The CESTAT New Delhi in the case of CCE vs. Vasundhra Flavours held that in case of increase in the number of operating packing machines in the factory during the month on account of addition or installation of packing machines, the differential duty amount, if any, shall be paid by the 5th day of the following month.
• Hence, in the assessee’s case since the differential duty was paid before the 5^th day of the following month, levy of interest was set aside.
  

Facts of the case:

• The assessee is a manufacturer of pan masala and chewing tobacco had 12 installed pan masala packing machines. For July 2013 the appellant admittedly paid duty on 27.7.2013 instead of by the 5th July 2013 which is due date as per Rule 9 of the Packing Machine (Capacity Determination and Collection of Duty) Rules, 2008.
• The adjudication officer in his order confirmed liability to interest of Rs.1,64,910/- on account of late remittance of central excise duty by 22 days from July 5 , 2013. This interest component was recovered from the appellant under Section 11AA, by deducting the said amount from the admissible amount of abatement allowed to the appellant for non-operation of some machines between 1^st July to 7^th July, 2013.
• On appeal to CCE(Appeals), the appeal of assessee was allowed by giving benefit of 3^rd provisio to Rule 9 of the above rules. Aggrieved revenue is in appeal before CESTAT.

  Contention of the Assessee:

• The learned counsel for the assessee contended that since for a period of seven days the machines were inoperative and reinstalled from 8^th July,2013 ,the 3^rd proviso to Rule 9 comes into picture which provides that in case of increase in the number of operating packing machines in the factory during the month on account of addition or installation of packing machines, the differential duty amount, if sany, shall be paid by the 5th day of the following month.
• The duty was paid on 27^th July,2013 , so no interest liability as due date was 5^th August,2013.

  Held by CESTAT:

• Tribunal observed that on analysis of Packing Machine (Capacity Determination and Collection of Duty) Rules, 2008 it is clear that where during any period, a manufacturer intimates its intention not to operate a packing machine and the same is sealed by the authorized officers, such machine is deemed have been uninstalled in terms of Rule 6(5).
• Third proviso to Rule 9 provides that in case of increase in the number of operating packing machines in the factory during the month on account of addition or installation of packing machines, the differential duty amount, if any, shall be paid by the 5th day of the following month.
• In the present case, the 12 machines of the assessee was sealed prior to 01.07.2013. The machines were inoperative during 1.7.2013 to 7.7.2013. The machines were unsealed and reinstalled on 8.7.13.
• In such circumstances under the third proviso to Rule 9, the duty was payable by the 5th of August, 2013. Duty was in fact paid on 27th July, 2013. Therefore, there is  no delayed payment of duty warranting levy of interest under Section 11AA of the Act.
• In result the revenue’s appeal was dismissed.