M.S. Ramachandra Rao, C.J.

1. The instant Central Excise Appeal has been filed under Section 35G of the Central Excise Act, 1944 against the Final Order No.75071-75072 of 2025 pronounced on 17.01.2025 by the CESTAT, Kolkata (Regional Bench- Court No.1).

2. The respondent is a manufacturer of Zarda Scented Tobacco manufactured with the aid of packing machine and packed in pouches.

3. The Central Government, in exercise of its powers under sub-sections (2) and (3) of Section 3A of the Central Excise Act, 1944 had framed the Chewing Tobacco and Unmanufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010 ( for short ‘the Rules’) which came into force on 13.4.2010 and had issued a notification in this regard.

4. As per this notification, units manufacturing Zarda scented Tobacco on or after 13.4.2010, using 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 or any other type of packing machine used for packing of Zarda scented tobacco are required to pay duty under Section 3A of the central Excise Act, 1944 at the rate prescribed in the notification dt.27.2.2010 as amended vide notification dt.13.4.2020.

5. Rule 7 of these Rules provides for calculation of duty payable for a month, Rule 8 of the said Rules deals with alteration in number of operating packing machines and Rule 9 deals with the manner of payment of duty and interest.

6. Two machines for retail sale price of Rs.4/- per pouch were in operation in the unit of the respondent for whole month of November, 2012 i.e., from 1.11.2012 to 30.11.2012. The respondent had paid a duty of rs.80,00,000/- in advance. Another machine for retail price Rs.2/- per pouch was installed on 20.11.2012 and was operational till 30.11.2012.

The show cause notice:

7. A show-cause notice was issued on 05.12.2013 to the respondent for short deposit of an amount of Rs.13,61,666/- for the period of November, 2012. It was alleged in the said notice that one single track FFS machine was added in the factory premises of the respondent during the month of November, 2012 and the said machine was installed and operated from 20.11.2012 to 30.11.2012 for production of the notified goods.

8. It was further contended that during the month of November, 2012 the respondent had installed and operated three packing machines for production of the notified goods, but did not pay duty under the Chewing Tobacco and Unmanufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010. It was alleged that the number of operating packing machines in the factory of the respondent was increased during the said month on account of addition of one packing machine during the month of November, 2012. According to the appellants, there was no provision for payment of proportionate duty under the Rules and that the respondent was, therefore, liable to pay Rs.13,61,666/-.

The reply of respondent to the show cause notice :

9. The respondent submitted a reply denying its liability to pay the said amount.

10. It was contended that when a new machine was added by the respondent, it became operational only from 20.11.2012. Therefore, the re-determined annual capacity of production becomes effective only from 20.11.2012, but not from 01.11.2012 as there was no deeming fiction providing for this in Rule 6 which provides the mechanism of determination of the annual capacity of production. It was stated that when the re-determined annual capacity of production is effective only from 20.11.2012, the amount of excise duty payable in respect of the third machine is payable only from that date and the appellants were not right in contending that the amount of excise duty for the third machine is payable from 01.11.2012. According to the respondent, this would tantamount to collecting the duty on more than the annual capacity of production, which is not permitted under Section 3A.

11. It is contended that though Rule 8 makes a provision for payment of duty even if a machine operates for a single day in a month, fourth proviso to Rule 9 is an exception thereto and it provides for a situation when a manufacturer starts producing goods of a new retail price during the month. They, therefore, contended that the demand of duty for the whole of the month of November, 2012 on the newly added third machine operated for the manufacture of notified goods of new retail price is not supported by law.

The order of the Joint Commissioner:

12. The Joint Commissioner, however, rejected the stand of the respondent and confirmed the demand.

13. According to him, during the month of November, 2012 the respondent operated two single track FFS machines for production of notified goods and a third machine for producing of chewing tobacco which was installed and operated in the factory for 11 days from 20.11.2012 to 30.11.2012.

14. According to him, the duty payable is required to be calculated in terms of Rule 7 of the Rules in such a way that the duty payable for a particular month shall be calculated by application of the appropriate rate of duty specified in the applicable notification to the number of operating packing machines in the factory during the month. According to him, duty is payable against the number of operating packing machines in the factory during the month.

15. He concluded that in the month of November, 2012 there were three numbers of operating packing machines and consequently, the annual capacity of the machine is required to be re-determined. Therefore, the respondent was required to pay full duty for the three operating packing machines installed in the factory during November, 2012 and, therefore, the demand of the duty was recoverable.

The order of the First appellate authority:

16. Challenging this order, the respondent filed an Appeal before the Commissioner (Appeals), CESTAT, Guwahati. It was numbered as Order in Appeal No.58/SH/CE(A)/GHY/2015 dt.31.03.2015 and the said Appeal was also dismissed on 31.03.2015 confirming the order of the Joint Commissioner. The order of the CESTAT:

17. This was challenged in Excise Appeal No.75597 of 2015 by the respondent before the CESTAT, Kolkata.

18. The Tribunal allowed the Appeal and set aside the orders passed by the Commissioner (Appeals) and the Joint Commissioner.

19. The CESTAT held that two machines for retail sale price of Rs.4/- per pouch were in operation for the whole month of November, 2012, i.e. from 01.11.2012 to 30.11.2012, for which the respondent had paid the full duty of Rs.80 lakhs in advance.

20. Another machine for retail sale price of Rs.2/- per pouch was installed on 20.11.2012 and was operational till 30.11.2012.

21. It held that Rule 8 cannot be read in isolation and has to be read harmoniously with Rules 9.

22. It quoted Rule 9 as it stood at that relevant time which stated as under:

“Manner of payment of duty and interest.-

The monthly duty payable on notified goods shall be paid by the 5th day of the same month and an intimation in Form - 2 annexed to these rules shall be filed with the Jurisdictional Superintendent of Central Excise before the 10th day of the same month:

Provided that …

Provided also] [Substituted by Notification No. G.S.R. 149(E) dated 1.3.2015 (w.e.f. 27.2.2010)] that if the manufacturer fails to pay the amount of duty by the due date, he shall be liable to pay the outstanding amount along with the interest at the rate specified by the Central Government vide notification under letters [section 11 AA] [Substituted for the words "section 11 AB" by Notification No. G.S.R. 174 (E) dated 17.3.2012 (w.e.f. 27.2.2010)] shall of the Act on the outstanding amount, for the period starting with the first day after the due date till the date of actual payment of the outstanding amount

Provided also 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:

Provided also that in case a manufacturer permanently discontinues manufacture of goods of existing retail sale price or commences manufacture of goods of a new retail sale price during the month, the monthly duty payable shall be recalculated on the pro-rata basis of the total number of days in that month and the number of days remaining in that month starting from the date of such discontinuation or commencement and the duty liability for the month shall not be deemed to have been discharged unless the differential duty is paid by the 5th day of the following month and in case the amount of duty so recalculated is less than the duty paid for the month, the balance shall be refunded to the manufacturer by the 20th day of the following month … … …” (emphasis supplied)

23. According to the learned Tribunal, the issue which has arisen in the Appeal filed by the respondent had already been dealt with by it in the case of Trimurti Fragrances Private Limited v. Commissioner of Central Excise, Delhi III (2015 (329) ELT 175 (Tri.-Del.)).

In the said judgment, the Tribunal was dealing with a case where the appellant had used 4 new machines installed w.e.f.24-7-2013 for manufacture of pouches of the new RSP –Rs.4 per pouch, which was not earlier manufactured by them. The said Tribunal had held that the fourth proviso to Rule 9 would apply.

The Tribunal held that the said proviso was not about the manner of payment of duty, but was about calculation of duty in case, during a month, manufacture of some existing RSP has been permanently discontinued or manufacture of retail pouches of a new RSP has been started and the effect of the proviso was that it qualifies the method of calculation of duty prescribed under Rule 7.

It held that in respect of these 4 machines, the duty at the rate applicable for the MRP of Rs.4/- would be chargeable only for 8 days from 24th July to 31st July and not for the entire month. It was held that if the Department’s contentions were to be accepted, it would make the fourth proviso to Rule 9 redundant.

24. The Tribunal also relied on its own judgment in S.A. Fresheners Private Limited v. Commissioner of Central Excise, New Delhi2 where it had adopted the same view as in Trimurti Fragrances Private Limited (1 supra).

25. It, therefore, concluded that the respondent was liable to pay duty in terms of fourth proviso to Rule 9 of the Rules.

26. Admittedly, this judgment had not been questioned by the appellants before the Delhi High Court and had attained finality. In view of this rationale, the Appeal was allowed by the Tribunal.

27. Counsel for the appellants does not dispute the fact that the appellants had not challenged the ruling in Trimurti Fragrances Private Limited (supra) before the Delhi High Court and that the said judgment had attained finality. The appellants, therefore, cannot be allowed to argue contrary to the said decision by taking a different stand in this Appeal having accepted the judgment in Trimurti Fragrances Private Limited (supra).

28. We, therefore, find no merit in this Appeal. It is accordingly dismissed.

Pending application(s), if any, also stands disposed of.