[Order per : Rakesh Kumar, Member (T)]. - The facts leading to filing of this appeal are, in brief, as under.
1.1 M/s. Dharampal Satyapal Ltd. having their corporate office at A-85, 86, Sector-2, Noida and factory at B-1, Sector-3, Noida (hereinafter referred to as the appellant company) are engaged in manufacture of pan masala bearing brand name, ‘Rajnigandha’, ‘Tansen’, ‘Tuisi Sada’ and ‘Meetha Mazaa’ chargeable to Central Excise duty. Shri Rajiv Kumar is the Chairman and Managing Director of the appellant company and Shri Chiranjiv Roy Choudhory and Shri J.D. Desai are the Senior Vice-President (Technical Services) and Vice-President (Purchase) respectively of the appellant company. Shri Naresh Dhir and Shri Amit Singhal are the General Manager (Procurement) and General Manager (Legal) respectively of the appellant company. Shri Rohit J. Shah is the Director of M/s. Pakona Engineering (I) Pvt. Ltd. (hereinafter referred to as PKIL), GIDC, Vadodara who has supplied pouch packing machine, which is the subject matter of dispute in this case, to the appellant company.
1.2 The period of dispute in this case is from November, 2008 to July, 2010. During this period, the appellant company were discharging duty liability in respect of pan masala retail pouches being manufactured by them in terms of Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 (hereinafter referred to as PMPM Rules). In November, 2008, the appellant purchased a packing machine of model PK-90 GMP FFS machine from PKIL, Vadodara under their invoice dated 25-10-2008 and the machinery was received in the factory of the appellant company on 1-11-2008. On 3-11-2008 the appellant company filed an intimation to the Jurisdictional Deputy Commissioner as per the requirement of Rule 13(2) of the PMPM Rules. The packing machine was physically verified and sealed on 7-11-2008 in an uninstalled condition. On 17-11-2008 and 19-11-2008, the appellant company intimated the Jurisdictional Deputy Commissioner, Central Excise that they intend to operate the newly acquired packing machine w.e.f. 20-11-2008 and accordingly they also filed a revised declaration under Rule 6 in Form I in terms of Rule 6 of the PMPM Rules, wherein the relevant particulars of the newly added machine and also the MRP of the pouches, etc., were mentioned. In this form, the machine was declared as a “single track machine”. The machine was, thereafter, inspected by the Jurisdictional Central Excise officers and the Jurisdictional Deputy Commissioner vide Order No. 6/2008, dated 19-11-2008 conveyed his approval in respect of the newly acquired packing machine. This machine was used by the appellant company for manufacture of 18 gm. zipper pouches of pan masala. On 15-7-2010, the Jurisdictional Central Excise officers visited the factory and conducted verification of the PK-90 GMP model machine. As mentioned in para 1 of the show cause notice dated 15-7-2011 which was subsequently issued, the working of the machine PK-90 GMP was found as under :-
“Single laminate roll along with zip is fed into the machine. As the roll moves on, it is folded and sealed from three sides and the zip is embedded in between, by the machine. In the next step, two cutting knifes cut two pouches at the same time. On the rotating conveyer, these two pouches are picked up by the two clips. Thereafter, two openers/hoppers open the pouches and in the next step, spoons are dropped in both the pouches separately and simultaneously through the separate spoon conveyor attached with the machine. The said pouches are filled up with pan masala by two pouch fillers and a sealer seals the two pouches simultaneously and then the said two pouches come out of the machine on the conveyor belt. Thereafter, the pouches are picked up manually for further weighment and mega packing”.
1.3 The above working of the machine was also videographed by the investigating officers. The speed of this machine was found to be 150 pouches of 18 grams per minute. On inquiry, the officials of the appellant company informed the Departmental officers that this machine started manufacturing activity on November, 2008 and that it was purchased from PKIL, Vadodara and that the appellant company had been paying duty in respect of this machine by treating it at single track machine under PMPM Rules.
1.4 The officers also found that while this machine has been producing 150 pouches per minute of 18 gm. packs, this speed is double the speed provided for the RSP of above Rs. 6/- per pouch in Rule 5 of the PMPM Rules. On inquiry relating to the specifications of this machine through the website of suppliers PKIL, Vadodara, it was found that this machine has been described by them as Duplex machine with the speed of 180 pouches per minute while the simplex model of this machine produced up to 80 pouches per minute. According to the Department, as per the technical specifications of the - supplier PKIL, Vadodara, the machine appeared to be a double track machine which in terms of provision of Rule 5 of the PMPM Rules and of the Notification No. 42/2008-C.E., dated 1-7-2008 has to be treated as two machines. It, therefore, appeared that the appellant have evaded duty in respect of the pan masala pouches produced on this machine during period w.e.f. November, 2008 by misdeclaring the machine as single track machine in Form I declaration filed by them. Accordingly a show cause notice dated 30-7-2010 was issued to the appellant company for demand of duty of Rs. 25,98,69,504/- from them in respect of clearances of 18 gm. pan masala pouches during period from November, 2008 to July, 2010 along with interest thereon under Section 11AB and also for imposition of penalty on the appellant company under Rule 17 of the PMPM Rules. Subsequently, another show cause notice dated 15-7-2011 was issued to Shri Rajiv Kumar, CMD of appellant company, Shri Chiranjiv Roy Choudhory, Senior Vice-President to the appellant company, Shri J.D. Desai, Vice-President (Purchase), Shri Naresh Dhir and Amit Singhal, General Manager (Procurement) and General Manager (Legal and Excise) of the appellant company and M/s. Pakona Engineering (I) Pvt. Ltd., GDC, Vadodara, the supplier of the machine for imposition of penalty on them under Rule 26 of the Central Excise Rules, 2002.
1.5 The above show cause notices were adjudicated by the Commissioner vide Order-in-Original dated 31-1-2012 by which the Commissioner -
(a) held that the packing machine PK-90 GMP declared by the appellant company as single track should be treated as double track machine and w.e.f. November, 2008, the date on which it was installed the duty would be chargeable in respect of this machine accordingly;
(b) confirmed the duty demand of Rs. 25,98,69,504/- against the appellant company under proviso to Section 11A(1) of Central Excise Act, 1944 along with interest thereon under Section 11AB of Central Excise Act, 1944;
(c) imposed penalty of Rs. 25,98,69,504/- on the appellant company under Rule 17 of the PMPM Rules read with Section 11AC of Central Excise Act, 1944; and
(d) imposed penalty of Rs. 25,00,000/- each on Shri Rajiv Kumar, Shri Chiranjiv Roy Choudhory, Shri J.D. Desai, Shri Naresh Dhir and Shri Amit Singhal under Rule 26 of Central Excise Rules, 2002.
1.6 Against the above order of the Commissioner, these appeals have been filed.
2. Heard both the sides.
3. Shri T.R. Rastogi, Advocate, the learned Counsel for the appellants, pleaded that in terms of definition of ‘Packing Machine’ in Rule 2(c) of PMPM Rules, the term ‘Packing Machine’ includes all types of Form, Fill and Seal (FFS) machines by whatever name called, whether Vertical or Horizontal, with or without caller, single track or multi-track or any other type of packing machines used for packing of pouches of notified goods, that the machine, in question, “PK-90 GMP” machine is a duplex machine which produces two pouches simultaneously on a single line, that Explanation to Rule 5 of PMPM Rules read with its proviso and Notification No. 42/2008-C.E., dated 1-7-2008 provides that in the case of multiple track or multiple line packing machines, each track or line shall be deemed to be one single packing machine for the purpose of calculation of number of pouches per operating packing machine, unless the multiple track or multiple line machine besides packing the notified goods, performs additional processes involving moulding and giving a definite shape to such pouches with a view to distinguish the brand or prevent the counterfeiting of the goods, that since no definition of the term ‘multiple track’ or ‘multiple line’ packing machine has been given, this term should be construed as it is understood in common parlance, that in multiple track machines there are more than one line or track for production of retail pouches while in single track machine there is only one such line of production of pouches, that the machine, in question, is a single track duplex machine in the sense that only single laminate is fed into the machine along with zip and two pouches are produced at a time and as such it is a single track machine with higher speed, that in view of this, for the purpose of Rule 5 of the PMPM Rules and Notification No. 42/2008-C.E., dated 1-7-2008, the machine, in question, has to be treated as single track/single line machine not a two track or two line machine, that just because the speed of production is higher - almost two times the speed of simplex model of same machine, it cannot be treated as two track machine, that in terms of Board’s Circular No. 980/4/14-CX, dated 24-1-2014, the factor relevant for production on the basis of which the Excise duty is leviable has been notified as number of packing machines in the factory of the manufacturer and the deemed production per operating machine per month, as prescribed in Rule 5 of PMPM Rules is based on the average speed of the packing machine and the average working hours of the factory and the Excise duty is chargeable at the rates notified on the basis of retail rate price as notified under Notification No. 42/2008-C.E., dated 1-7-2008 and the Excise duty cannot be re-determined based on the speed of the packing machine or the actual production thereof, that in view of this, just because the actual production of the machine, in question, is higher than the deemed production, the duty cannot be demanded on such higher production, that in terms of the opinion of IIT professors, referred to in Para 7.5.4 of the impugned order, the machine, in question, is a duplex model of the single track FFS machine, that Apex Court in the case of CC (Import), Mumbai v. Konkan Synthetic Fibres reported in (S.C.) has held that while interpreting an expression used in a particular taxing entry, opinion of the experts in field of the trade, who deal with those goods, should not be ignored and should be given due importance, that the finding of the Commissioner in Para 7.5.9 of the impugned order that in the machine, in question, there are more than one directions or tracks or lines of travel in which the goods moved during different stages involved in the process of manufacture till completion of manufacturing process of the output, is factually incorrect, as in this machine there is only one track or line of travel in which the pouches move in the process of manufacture till the completion of manufacturing process, that the machine, in question, after installation had been inspected by the Jurisdictional Deputy Commissioner and he had accepted the declaration filed by the appellant in Form I in terms of Rule 6 of the PMPM Rules, that once the declaration has been accepted vide Order No. 6/2008, dated 19-11-2008, without reviewing this order of the Assistant Commissioner, the matter cannot be reopened and the duty cannot be demanded on the basis that the machine, in question, is a two track machine, and that in any case, there is absolutely no justification for imposition of penalty under Rule 26 on Shri R.J. Shah, Director of the machinery supplier PKIL, Vadodara or on Shri Rajiv Kumar, Managing Director, Shri Chiranjiv Roy Choudhory, Senior Vice-President, Shri J.D. Desai, Vice-President, Shri Naresh Dhir, General Manager (Procurement) and Shri Amit Singhal, General Manager (Legal and Excise). He emphasised that the machine, in question, duplex model of a single track/single line FFS machine whose speed of production is higher than the similar machines of the simplex model and the same cannot be treated as a multi-track or multi-line machine. He, therefore, pleaded that the impugned order is not sustainable.
4. Shri Yashpal Sharma, the learned DR, defended the impugned order by reiterating the findings of the Commissioner and emphasised that since admittedly the speed of production of the machine, in question, is almost twice the machine of the similar machine of the simplex model, the same has to be treated as two track machine and the duty has to be charged accordingly. He, therefore, pleaded that there is no infirmity in the impugned order.
5. We have considered the submissions from both the sides and perused the records.
6. Section 3A(1) authorises the Central Government to notify the excisable goods having regard to the nature of the process of manufacture or production of the goods, the extent of duty evasion in respect of such goods or other relevant factors and with a view to safeguard the interests of the revenue, for assessment of duty as per the provision of this Section. Sub-section (2) of Section 3A authorises the Central Government to make rules in respect of the goods specified under Section 3A(1) for determining the annual capacity which shall be deemed to be the annual production of such goods by the factory or specify the factors relevant to the production of such goods and the quantity that is deemed to be produced by the use of a unit of such factor. Gutkha and pan masala packed in retail pouches for sale has been notified under Section 3A(1) for assessment of duty under Section 3A. In this regard the Central Government under Section 3A(2) and 3A(3) of the Act, has framed PMPM Rules. In terms of Rule 4 of these Rules, the relevant factor for determining the deemed production of the goods in a factory is the number of pouch packing machines installed in the factory of the manufacturer. Rule 5 of the PMPM Rules specifies the deemed production of number of pouches per operating packing machine per month for different RSP slabs. Thus for pouches of RSP up to Re. 1/-, the deemed production of pouches per machine per month is 37,44,000. The same is deemed production per machine per month in respect of the pouches of RSP slab Re. 1.01/- to Re. 1.50/-. For pouches RSP slabs from Re. 1.51/- to Rs. 2/-, the deemed production per machine per month is 35,56,800 and same is the deemed production per machine per month in respect of the pouches of the RSP of Rs. 2.01/- to Rs. 3/- and so on. For pouches of RSP above Rs. 6/- the deemed production per machine per month is 33,69,600. In terms of explanation to Rule 5 read with its proviso, in case of multiple track or multiple line packing machines, each track or line would be deemed to be in one packing machine unless the multiple tracks are for the purpose of performing additional processes involving moulding or giving a definite shape to the pouches with a view to distinguish the brand or to prevent counterfeiting of the goods. The per month per machine deemed production for various RSP slabs has been specified keeping in view the average speed of the machine and the average number of working hours in a day and average number of working days in a month. Having specified the deemed production per machine per month for the pouches of different RSP slabs, the assessment of duty has not been left to the assessing officers. Instead, Notification No. 42/2008-C.E., dated 1-7-2008 issued under Section 3A(4) of the Act specifies the total rate of duty per machine per month for different RSP slabs and this duty includes in addition to the duty leviable under Section 3(1) of Central Excise Act, 1944 the additional duty of Excise leviable under Section 85 of the Finance Act, 2005, National Calamity Contingent Duty leviable under Section 136 of the Finance Act, 2001, Education Cess leviable under Section 91 of the Finance Act, 2004 and Secondary and Higher Education Cess leviable under Section 136 of the Finance Act, 2007.
7. Thus, the duty per machine per month payable by an assessee has been specified under Notification No. 42/2008-C.E. for different RSP slabs and for this purpose in case of multiple line/multiple track machine, where the multiple track are not for performing additional processes involving moulding or giving definite shape to pouches with a view to distinguish the brand or to prevent the counterfeiting of the goods, each track is to be treated as one single machine. The Board vide Circular No. 980/4/14-CX, dated 24-1-2014 has clarified that in the cases where the actual production of the machine because of some manufacturer operating the machine at the highest possible speed is more than the deemed production, no differential duty is to be charged. The dispute in this case has to be looked at on the basis of these principles.
8. The dispute in the present case is about PK-90 FFS Machine of duplex model supplied by PKIL, Vadodara. There is no dispute that it is a duplex machine in the sense that while only one laminate roll is fed into the machine with zip, two pouches are cut at a time and therefore, the speed of production of this machine is about two times the packing speed of simplex model of such machine. The point of dispute is as to whether this is to be treated as two track machine and hence it is to be treated as two machines or it is to be treated as single track machine.
9. In a multi-track machine, there are more than one parallel path traced by the pouches as they are formed and later filled and all the pouches in the same track follow the same path. The multiple track/multiple line machines operate with multiple rolls of laminate and the purpose of operating a multi-line/multi-track machine is to consolidate space and economise on electronic processors and machine operators. As per the technical literature of the supplier, the machine, in question, is a duplex machine and as such there is only one track along with the pouches are formed and are later filled. The only innovation in this machine that on the same line or track at a time two pouches are cut and filled as a result of which two pouches are formed, filled and sealed resulting in much higher speed of production of pouches. This is clear from the report dated 15-10-2010 of IIT Professor Shri S. Sanghi of Applied Mechanical Department and Professor Shri S. Mukherjee of Mechanical Engineering Department of IIT, Delhi. This report also clearly classifies the machine, in question, as a single track duplex machine. In our view there is absolutely no basis for the Commissioner’s finding that it is a multiple track machine. Just because the speed of this machine is much higher than the normal machines, it cannot be treated as a multiple track machine.
10. Rule 5 of the PMPM Rules and Notification No. 42/2008-C.E., dated 1-7-2008 distinguish only between the single track and multiple track machines and in a multiple track machine, in certain conditions, each track is to be treated as a separate machine. Since the PMPM Rules or Notification No. 42/2008-C.E. do not define the term - ‘multiple track’ or “multiple line” machines, these terms are to be construed in the sense in which the same are understood in trade parlance and accordingly the multiple track or multiple line machines are those in which there are more than one paths traced by the pouches as they are formed and later filled and all the pouches in the same track follow the same path. This feature is not there in the machine, in question, which is duplex model of ‘PK-90 GMP’ machine, as against its simplex model. Neither the PMPM Rules nor the Notification No. 42/2008-C.E. make a distinction between the simplex and duplex machine. The difference between the simplex and the duplex machine is in the speed ‘multiple track’ or and in terms of the Board’s Circular No. 980/4/14-CX, dated 24-1-2014 in case of a manufacturer operating machine at a higher speed as a result of which the actual production is more than the deemed production, as mentioned in Rule 5 of the PMPM Rules, no differential duty is to be demanded. When the PMPM Rules do not distinguish between the simplex FFS machine and the duplex FFS machines, though there is considerable difference between their speeds, and there is no provision that duplex is to be treated as two machines. Rule 5 of PMPM Rules and the Notification No. 42/2008-C.E. cannot be interpreted to treat such a machine as two machines. It is well settled law that a casus omisus cannot be provided by the Courts or the Tribunals. It is only in the year 2015 that by Notification No. 5/2015-C.E. (N.T.), dated 1-3-2015, Rule 4 of PMPM Rules was amended to provide that “maximum packing speed at which such packing machines can be operated for packing of notified goods of various RSPs” would also be a relevant factor in addition to “number of packing machines in a factory” and Rule 5 of PMPM Rules was amended to specify deemed production of pouches per machine per month for different RSP slabs and different maximum operating speeds and Notification No. 42/2008-C.E. was amended to provide different rate of duty per machine per month for different RSP slabs and different maximum operating speeds of the machines. But these provisions cannot be given retrospective effect, as these are not retrospective amendments.
11. In view of the above discussion, the impugned order is not sustainable. The same is set aside. The appeals are allowed with consequential relief.
(Pronounced in open Court on 25-3-2015)