Rule 9 requires pro-rata duty when manufacture at a new retail sale price begins mid-month.

The respondent manufactured Zarda scented tobacco using packing machines governed by the Chewing Tobacco and Unmanufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010.

In November 2012, two machines producing goods with a retail sale price (RSP) of ₹4 per pouch operated throughout the month; a third machine, producing goods with an RSP of ₹2 per pouch, was installed and operated from 20 November

The Department demanded ₹13,61,666 in additional duty, contending that duty was payable for the whole month because three machines had operated during November.

The Joint Commissioner confirmed the demand and the Commissioner (Appeals) upheld it.

The CESTAT set those orders aside, holding that the duty for the new RSP was payable pro rata from the date manufacture commenced, under the fourth proviso to Rule 9.

The Union of India and the Assistant Commissioner appealed under Section 35G of the Central Excise Act, 1944.

Whether the fourth proviso to Rule 9 permits pro-rata duty when a manufacturer commences production of goods with a new RSP during a month, notwithstanding the increase in operating packing machines during that month.

Whether the appellants could argue against the CESTAT’s interpretation in Trimurti Fragrances Private Limited after that decision had attained finality and had not been challenged by them.

Section 3A of the Central Excise Act, 1944 provides for levy and collection of excise duty based on the annual capacity of production determined in accordance with the statutory scheme.

Rules 7, 8 and 9 of the 2010 Rules respectively address monthly duty calculation, changes in the number of operating machines, and payment of duty.

The fourth proviso to Rule 9 provides that where a manufacturer commences manufacture of goods with a new RSP during a month, the monthly duty is recalculated pro rata from the date of commencement.

Rule 8 must be read harmoniously with Rule 9; the fourth proviso qualifies the method of duty calculation and should not be rendered redundant.

The CESTAT’s decisions in Trimurti Fragrances Private Limited v. Commissioner of Central Excise, Delhi-III, 2015 (329) E.L.T. 175 (Tri.-Del.), and S.A. Fresheners Private Limited v. Commissioner of Central Excise, New Delhi, 2018-TIOL-1026-CESTAT-DEL, applied that interpretation.

The Court noted that the third machine was installed and operated only from 20 November to produce goods with a new RSP, while the respondent had paid the full monthly duty for the two machines operating throughout November.

Applying the fourth proviso to Rule 9, as interpreted in Trimurti Fragrances and S.A. Fresheners, the CESTAT had correctly treated duty on the new-RSP goods as payable on a pro-rata basis from the date their manufacture began; charging duty for the entire month would defeat the proviso’s effect.

The Court also relied on the appellants’ acceptance of the Trimurti Fragrances decision, which they had not challenged, and held that they could not take a contrary position in this appeal.

It found no merit in the appeal and dismissed it, leaving the CESTAT’s order setting aside the duty demand undisturbed; any pending applications were also disposed of.