By TIOL News Service

AHMEDABAD, AUGUST 30, 2015: STATUTES should be construed not as theorems of Euclid but words must be construed with some imagination of the purpose which lie behind them - Lenigh Valley Coal Co. v. Yensavage, 218 FR 547.

The Appellants manufacture Gutkha and Pan Masala and were discharging duty liability on the basis of annual capacity of production under 'Pan Masala (Packing Machine, Capacity Determination & Collection of Duty) Rules 2008.

By a judgment dated 07.12.2010, the Supreme Court had ordered a complete ban on use of plastic pouches in packing of tobacco, gutkha etc.. The Appellant discharged the duty liability for the month of February 2011 by the 5th of the same month as per Rule 9 of the Rules 2008. It came to their knowledge that the Ministry of Environment & Forest, Govt. of India, issued a Notification S.O.S. No.249 (E) dt. 04.02.2011 banning use of plastic pouches in packaging of Pan Masala and Gutkha with immediate effect. The Appellant was unable to continue their production and, therefore, by letter dt.08.02.2011, they informed the jurisdictional Assistant Commissionerwith a request for sealing their machines as required under Rules, 2008. Accordingly, the Superintendent, on 10.02.2011, sealed the machines installed in the Appellant's factory. Subsequently, Supreme Court by order dt.17.02.2011 directed that the notification will be effective from 01.03.2011. Hence, the Appellants re-opened their factory and pursuant to their application for de-sealing of the machines, the machines were de-sealed on 17.02.2011.

The Appellants filed a refund claim of duty on 29.06.2011 on pro-rata basis of the duty paid during period of closure of their factory for 6 days.

A SCN was issued proposing to reject the claim and the adjudicating authority did the needful by holding that the period qualifying for abatement should be any continuous period of 15 days or more in view of rule 10 of the Rules, 2008.

The Commissioner (Appeals) too rejected their appeal and, therefore, the gutkha maker is before the CESTAT.

After hearing both sides, the Bench adverted to the various rules in the Rules, 2008 and by placing reliance on the decision in Trutuf Safety Glass Industries Ltd 2007-TIOL-140-SC-CT inter alia observed -

+ Rule 9 of Rules 2008 is a machinery provision prescribingthe manner of payment of duty and interest.

+ Rule 16 of the said Rules stipulates despite anything contained in these rules, where 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 DC/AC, for this purpose, the duty payable by him for the month shall be re-calculated on pro-rata basis and if there is any excess payment, it shall be refunded to a manufacturer by 20th day of the following month.

+ There is a distinction between 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, Rule 16, 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 ceases to work in respect of all the machines installed in the factory and filed an intimation for surrender of registration, the monthly duty payable shall be recalculated on pro-rata basis and the excess amount paid by them shall be refunded.

+ 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, Rule 16 would apply in case, a manufacturer closed down his factory in respect of all the machines installed in the factory.

+ 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. The benefit under Rule 10 would be extended in case of non-working of all operating packing machines for certain period. But, in case a manufacturer ceases 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.

+ In the peculiar facts and circumstances of the case the refund claim filed by the Appellant would come within the purview of Rule 16 of Rules 2008.

+ There is no provision in Rules 2008 that after declaring "permanently ceases to work" the manufacturer would not be entitled to re-open his factory. Rule 16 would cover the situation, where a manufacturer filed an intimation to the Deputy Commissioner of Central Excise intimating permanently ceases to work or surrender of registration. There is no bar on re-opening of the factory in Rules 2008, which is a subsequent event.

+ It is already observed that in the present case, taking into account of order of Supreme Court, notification of Ministry of Environment and Forest, and the letter dt.08.02.2011 of the Appellant to close down their factory and further consequence of surrender of registration may not be followed due to subsequent order dt.17.02.2011 of Supreme Court, the Appellant should not be penalized by rejecting the refund claims, for the reason, they had re-opened the factory and such reading of the said provision, would be totally unjust, improper and against all cannons of natural justice and fair play.

Holding that, in the peculiar facts and circumstances of the case, the Appellant is entitled to refund of the duty for the period the factory was closed, the order was set aside and the appeal was allowed. 

(See 2015-TIOL-1818-CESTAT-AHM )