Case Law Details
Commissioner of Central Excise & ST Vs Vishnu Packaging (CESTAT Ahmedabad)
CESTAT Ahmedabad held that refund under rule 16 of Pan Masala Packing Machine (Capacity Determination and Collection of Duty) Rules, 2008 allowable on account of change in constitution of firm into a private limited company.
Facts- The respondent is a manufacturer of Pan Masala, falling under Chapter 24 of the Central Excise Tariff Act, 1985, and are working under compounded levy scheme, according to which respondent have to pay the duty on number of pouch packing machines, installed and working during the month as governed under Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008. The respondent had paid duty amounting to Rs. 11,25,00,000/- for the month of June 2011 for the goods viz ‘Pan Masala Containing Tobacco (Gutkha)’ having a maximum retail price of Rs. 2/- per pouch and Rs. 5 per pouch in respect of 25 pouch packing machines. As the respondents were working under a compounded levy scheme, they were required to pay the duty on number of pouch packing machines (PPMs), installed and working during the month.
The respondent was required to pay a total duty of Rs. 11,25,00,000/- for all 25PPMs installed and in working condition in their factory during June 2011. Accordingly, they have paid central excise duty of Rs. 11,25,00,000/- in June 2011.
The respondent thereafter filed a refund claim amounting to Rs. 2,25,00,000/- online before the Jurisdictional Assistant Commissioner for the amount of duty paid in respect of 25 pouch packing machines, which were closed and sealed during the period from 25.06.2001 to 30.06.2011 i.e. for 6 days. The refund sanctioning authority sanctioned the refund claim to the respondent under Rule 16 of Pan Masala Packing Machine (Capacity Determination and Collection of Duty) Rules, 2008 read with Section 11B of the Central Excise Act 1944.
Being aggrieved by the refund order, revenue filed the appeal before the Commissioner (Appeals), who vide the impugned order upheld the order of lower authority and rejected the appeal filed by the department.
Conclusion- Held that there is a clear distinction between the ownership of a partnership firm and a Private Limited Company. Therefore even if a partnership firm ceased its operation and in place of the same a Private Limited Company started operation, both being separate legal entities, it cannot be said that the partnership firm has not ceased its production permanently. It’s very obvious that when one entity closed its production and surrendered the registration and a new entity obtained a fresh registration with a new PAN, the former entity became non-existent and its closure of production falls under the term ‘permanently’. Accordingly, the present case is clearly covered under Rule 16 of the Rules and consequently the respondent is legally entitled for refund of duty.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
Revenue is in appeal against the impugned order–in-appeal No. 197/2012(Ahd-II)/CE/AK/Commr(A)/ Ahd dated 14.08.2012.
1.1. The facts of the case are that the respondent is a manufacturer of Pan Masala, falling under Chapter 24 of the Central Excise Tariff Act, 1985 and are working under compounded levy scheme, according to which respondent have to pay the duty on number of pouch packing machines, installed and working during the month as governed under Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008. The respondent had paid duty amounting to Rs. 11,25,00,000/- for the month of June 2011 for the goods viz „Pan Masala Containing Tobacco (Gutkha)‟ having maximum retail price of Rs. 2/- per pouch and Rs. 5 per pouch in respect of 25 pouch packing machines. As the respondent were working under compounded levy scheme, they were required to pay the duty on number of pouch packing machines (PPMs), installed and working during the month. The respondent was required to pay total duty of Rs. 11,25,00,000/-for all 25PPMs installed and in working condition in their factory during the month of June 2011. Accordingly they have paid central excise duty of Rs. 11,25,00,000/- during the month of June, 2011. Respondent vide letter dated 22.06.2011 requested to the Assistant Commissioner, Central Excise Division IV Ahmedabad –II, for sealing of all the said 25PPMs with effect from 25.06.2011, which were sealed by the Range Superintendent at midnight of 24.06.2011. The respondent, thereafter filed refund claim amounting to Rs. 2,25,00,000/- online before Jurisdictional Assistant Commissioner for the amount of duty paid in respect of 25 pouch packing machines, which were closed and sealed during the period from 25.06.2001 to 30.06.2011 i.e. for 6 days. The refund sanctioning authority vide Order-In-Original dated 06.09.2011 sanctioned the refund claim to the respondent under Rule 16 of Pan Masala Packing Machine (Capacity Determination and Collection of Duty) Rules, 2008 read with Section 11B of the Central Excise Act 1944. Being aggrieved with the refund order, revenue filed the appeal before the Commissioner (Appeals), who vide impugned order upheld the order of lower authority and rejected the appeal filed by the department. Hence, the Revenue before this Tribunal.
2. Shri Rajesh Nathan, Learned Assistant Commissioner (AR) appearing on behalf of the Revenue reiterates the grounds of appeal and submits that Rule 16 ibid is clear that the same would apply in a case where manufacturer permanently ceases to work in respect of all the machines installed in the factory and who has filed intimation for surrender of registration. In the instance case the manufacturer was M/s Vishnu Packaging (Unit -2). The said manufacturer changed the constitution of their firm into a private limited company with effect from 21.06.2011. The said assessee filed intimation for sealing of their pouch packing machines on 22.06.2011, accordingly all the 25 PPMs were sealed from midnight of 24/25.06.2011. Thereafter vide letter dated 24.06.2011 they informed the department regarding change in their constitution with effect from 21.06.2011 and surrender their registration on 06.07.2011 and thereafter they continued to function in the same factory premises with the same set of machines under the new name and style of M/s Vishnu Pouch Packing Pvt. Limited.
2.1 He argued that in the present matter Rule 16 would not be applicable and Refund granted under the said Rule was not proper. The respondent had not permanently ceased to work as required in Rule 16. They continued the manufacturing activity in the same factory premises on the same set of machines, soon after change in their constitution.
2.3 He also submits that further refund even if granted under Rule 10 would not be applicable and not proper in this case, as the said rule stipulated that during the period of such abatement no manufacturing activity, whatsoever, in respect of notified goods shall be undertaken, and no removal of notified goods shall be effected by the manufacturer, except that notified goods already produced before the commencement of the said period which may be removed within the first two days of the said period. In the instant case, the PPMS were sealed at 24.00 hrs on 24.06.2011, and the assessee cleared the goods upto 27.06.2011 i.e. beyond the stipulated period of two days.
3. On the other hand, the Learned Consultant Shri N.K. Tiwari opposed the contention of the revenue and reiterates the finding of impugned order.
4. We have carefully considered the submissions from both the sides and perused the records.
4.1 On going through the content of letter dated 24-06-2011 of the respondent addressed to the Jurisdictional Officers, it is seen that the respondent clearly informed the department that M/s Vishnu Packing, a partnership firm is holding valid registration certificate for the manufacture of Pan Masala and Pan Masala containing tobacco, commonly known as Gutka, falling under Chapter 21 and 24 respectively. They have changed the constitution of said firm and has converted into Private Limited company with effect from 21.06.2011. They have been issued certificate of incorporation under the name and style of Vishnu Pouch Packing Pvt. Ltd. and have been issued Corporate Identity Number. Further they also informed the department that they have applied for PAN No. and on receipts of the same, they will apply for New Central Excise Registration. It is clear that during the disputed period M/s Vishnu Packing (Unit No. 2) cease to be is existence. Further for new company they have filed an online application for central excise registration on 30.06.2011. It is on record that all the machines were in sealed condition during the disputed period.
4.2 We find that Respondent with effect from midnight of 24.06.2011 with effect from 25.06.2011 they were compelled to stop their manufacturing activities and there is no dispute that all the machines were sealed in the midnight of 24-06-2011 by the department and hence there could not be manufacture of any gutkha from 25-06-2011 onwards. Rule16 of the Pan Masala Packing Machines Rules provides that when a manufacturer permanently ceases to work in respect of all the machines installed in the factory and who has filed an intimation for surrender of registration with the Deputy Commissioner/Assistant Commissioner of the Central Excise, as the case may be, with a copy to the Superintendent of Central Excise for this purpose, the duty payable by him for the month shall be calculated pro rata on the basis of the total number of days in the said month and total number of days before the date of receipt of the said intimation with the Deputy Commissioner/Assistant Commissioner of Central Excise, and the duty paid for the month in accordance with the notification shall be adjusted towards the duty so calculated and on such adjustment, if there is any excess payment, it shall be refunded to the manufacturer by 20th day of the following month and deficiency, if any, shall be payable by him by the 5th of the following month. Accordingly, we find that the refund sanctioned to respondent is legally correct.
4.3 The grounds of revenue in the present matter is factually incorrect as from the respondent’s letter to the department, it is absolutely clear that the respondent wanted to stop the manufacture of gutkha permanently in view of change of constitution on its manufacture and sale. Further it is on record that they have intimated the department regarding the apply for new registration after receiving of PAN.
4.4 We further find that there is a distinction between the Rule 10 and Rule 16 of the said Rules. The claim of abatement under Rule 10 will apply, in case, a factory did not produce the notified goods during any continuous period of 15 days or more and followed the procedure as mentioned therein. On the other hand, Rule16, starts with the words “Notwithstanding anything contained in these rules”, make it clear that nevertheless all the provisions in Rules 2008 when a manufacturer permanently cease, to work in respect of all the machines installed in the factory and filed an intimation for surrender of registration with the Deputy Commissioner of Central Excise, the monthly duty payable shall be recalculated on pro-rata basis and the excess amount paid by them shall be refunded. The expressions “a manufacturer permanently ceases to work in respect of all the machines installed in the factory” in Rule16 have wide amplitude. This should be read with the broad and comprehensive meaning to cover the situation, other than Rule 10 of non-production of goods for temporary period. To sum up, Rule 10 extended abatement in case of non-production of goods for certain period. But, Rule16 would apply in case, a manufacturer closed down his factory in respect of all the machines installed in the factory.
4.5 Further, the other aspect is that the use of words “operating packing machine” in Rules 5, 6(3), 7 and 8 would indicate that the duty for a particular month shall be payable on the basis of number of packing machines operating in the factory. Second Proviso to Rule 8 stipulates that in case of non-working of any installed packing machine, for any reason whatsoever, the same shall be deemed to be operating packing machine for the month. The benefit under Rule 10 would be extended in case nonworking of all operating packing machines for certain period. But, in case a manufacturer cease to work permanently and all the machines were sealed by the Superintendent of Central Excise on the basis of intimation given by them, resulting to none of the packing machines would be operating and the duty if any paid, should be refunded.
4.6 The Hon’ble Supreme Court in the case of Trutuf Safety Glass Industries Ltd. v. Commissioner of Sales Tax – 2007 (215) E.L.T. 14 (S.C.), held as under : –
“18. The question is not what may be supposed and has been intended but what has been said. “Statutes should be construed not as theorems c Euclid”. Judge Learned Hand said, “but words must be construed with some imagination of the purposes which lie behind them”. (See Lenigh Valley Coal Co. v. Yensavage, 218 FR 547). The view was re-iterated in Union of India and Ors. v. Filip Tiago De Gama of Vedam Vasco De Gama (AIR 1990 SC 981).”
4.7 The Hon’ble Punjab & Haryana High Court in the case of Godwin Steels Pvt. Ltd. v. CCE, Chandigarh – 2010 (254) E.L.T. 202 (P&H), while dealing with Section 3A of the Central Excise Act, 1944 read with Rule 96ZQ(2) of erstwhile Central Excise Rules, 1944, observed that it was wholly unjust for the Department to recover the duty for the whole month of November, during which, the factory had not commenced production. When the factory was not in production, then obviously, it is not liable to pay duty during the period of non-production. The Tribunal in the case of Rajat Industries Pvt. Ltd. v. CCE, Delhi-I – 2012 (284) E.L.T. 581 (Tri.-Del.), while dealing with the present Rules 2008, following the decision of Hon’ble Punjab & Haryana High Court in the case of Godwin Industries Pvt. Ltd. held as under :-
“10. In order to find answer to this question it would be useful to have a looks on the relevant provisions of the Central Excise Act, relating to levy and collection of excise duty. Section 3 of the Excise Act is the main charging section which provides that there shall be levied and collected excise duty on excisable goods which are produced or manufactured in India. From this, it is evident that excise duty is an incidence of tax on production or manufactured of the goods. That being the case, it is difficult to sustain the plea that the appellant assessee can be charged excise duty for the period during which his unit had not even commenced the production. The department is seeking to justify the impugned order under Rule 9 of PMPM Rules of 2008 framed under Section 3A of the Central Excise Act. Section 3A confers power on the Central Government to charge excise duty on the basis of capacity of production in respect of notified goods. The basic object of conferring such power on the Central Government is to prevent evasion of excise duty in respect of certain excisable goods with a view to safeguard the interest of revenue. This, does not mean that Section 3A confer power on the Government to frame the rules to charge excise duty for the period prior to the commencement of production. Therefore, in our view the impugned order confirming demand for First three days of May 2009 when the production had not even commenced cannot be sustained. In our aforesaid view, we find strength from the judgment of Punjab & Haryana High Court in the matter of Godwin Steels (P) Ltd. wherein while dealing with the similar issue of Compounded levy scheme in relation to steel mfg. unit it was held thus :-
“3. After hearing the learned counsel for the parties, we are of the considered opinion that as the petitioner’s factory started production with effect from 17-111997, therefore, it was wholly unjust for the department to recover the duty for the whole month of November, during which, its factory had not commenced production. When the factory of the petitioner was not in production, then obvious, it is not liable to pay the duly during the period of non-production”.
4.8 In the present case, it is on record that the respondent vide their letter dated 22.06.2011 requested for sealing of all the said 25 PPMs w.e.f. 25.06.2011 and which were sealed by the Range Superintendent at the midnight of 24-25.06.2011. There is no dispute that the Superintendent of Central Excise was acted upon on the basis of intimation by letter dated 2206-2011 and sealed the machine on midnight of 24-06-2011. Thus, on 2506-2011, the respondent closed down their factory. The intimation given by the respondent to the Assistant Commissioner of Central Excise by letter dated 22.06.2011 would show that the respondent permanently ceases to work in respect of all the machines installed in the factory and it would be followed for surrender of registration due to the change of constitution of name. In such a peculiar facts and circumstances of the case, in our considered view, the refund claim filed by the respondent would come within the purview of Rule16 of Rules 2008.
4.9 The contention of the revenue that the respondent had not permanently ceased to work in as much as they had only changed the constitution of their firm and therefore, it cannot be treated as “permanently ceases to work”. It is difficult to accept the contention of the learned Authorised Representative for the Revenue, as after the change of constitution new company came into existence and respondent firm (Partnership firm) has been treated as permanently ceases to works. There is no provision in Rules 2008 that after declaring “permanently ceases to work”, the manufacturer would not be entitled to reopen his factory with new name. Rule16 would cover the situation, where a manufacturer filed an intimation to the Deputy/ Assistant Commissioner of Central Excise intimating permanently ceases to work for surrender of registration. There is no bar on reopening of the factory with new registration in Rules, 2008, which is a subsequent event. Further, the respondent in its letter categorically stated that they were giving intimation of closure of the factory-as required under the Rules, would be implied surrender of registration. Further on their request letter department also acted and sealed the machines. The respondent should not be penalized by rejecting the refund claims, for the reason, the constitution has been changed and after obtaining fresh registration the factory was opened as new by the different legal enitity and considering the same as not permanently ceases, would be totally unjust, improper and against all cannons of natural justice and fair play. So, in such peculiar facts and circumstances of the case, we hold that the respondent is entitled to refund of the duty for closing down of their factory for the disputed period.
4.8 In the undisputed facts of this case one important aspect needs to be kept in mind that the revenue gravely erred in contending that the factory was not permanently ceased to work as the changed Pvt. Ltd. Company restarted the production. On this, we are very clear in our mind that there is clear distinction in the ownership of partnership firm and a Private Limited Company. Therefore even if a partnership firm ceased their operation and in place of the same a Private Limited Company started operation, both being separate legal entities, it cannot be said that the partnership firm has not ceased it’s production permanently. It’s very obvious that when one entity closed it’s production and surrendered the registration and a new entity obtained a fresh registration with a new PAN, the former entity became nonexistent and it’s closure of production is clearly falls under the term „permanently’. Accordingly, the present case is clearly covered under Rule 16 of the Rules and consequently the respondent is legally entitled for the refund of duty.
5. In view of the above, we find that there is no infirmity in the impugned order, hence, we uphold the impugned order. The appeal filed by the revenue is dismissed.
(Pronounced in the open court on 15.09.2023)
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