Annual capacity under hot rerolling rules cannot be refixed under Rule 5 absent an increase in production capacity.

Rule 5 of the Hot Rerolling Steel Mills Annual Capacity Determination Rules, 1997 could not be used to refix annual capacity where the appellants' production capacity had not increased. The Tribunal followed the Larger Bench view that Rule 5 applies only where the statutory conditions for its invocation exist, including cases of unchanged capacity or augmentation through machinery changes, and not where the machinery change results in reduced capacity. The annual capacity already determined under Rule 3(3) was therefore accepted as the correct basis in favour of the assessee.

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Issues: Whether Rule 5 of the Hot Rerolling Steel Mills Annual Capacity Determination Rules, 1997 could be invoked to determine annual capacity of production where there was no increase in production capacity and whether the capacity already determined under Rule 3(3) was to be accepted.

Analysis: The dispute turned on the admitted that the appellants' annual capacity of production had not increased. The Tribunal applied the Larger Bench ruling that Rule 5 is relevant only where there is no change in annual capacity or where capacity is augmented on account of change in machinery, and not where the change in machinery results in reduction in capacity. On that basis, the Commissioner's recourse to Rule 5 was held to be contrary to the governing legal position, and the determination under Rule 3(3) was treated as the correct basis.

Conclusion: Rule 5 could not be invoked on the facts of the case, and the annual capacity of production had to be accepted as determined under Rule 3(3), in favour of the assessee.

Ratio Decidendi: Rule 5 of the Hot Rerolling Steel Mills Annual Capacity Determination Rules, 1997 applies only where the statutory conditions for its invocation exist, and it cannot be used to refix annual capacity when there is no increase in capacity.

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