Capacity-based duty demands require reassessment under the applicable rules and circular where a second rolling mill is involved.

The capacity-based duty demand for a second rolling mill could not be sustained without applying the Hot Re-Rolling Steel Mills Annual Capacity Determination Rules, 1997 and the TRU circular dated 26 February 1999. Those materials require redetermination where the installed machine changes, and where one heating furnace feeds two rolling mills, the higher capacity mill is to be taken as the unit's assessed capacity. Because the adjudication proceeded without examining those rules and circular, and treated the assessee as having admitted liability, the matter required reconsideration by the Commissioner after proper examination and a personal hearing.

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Issues: Whether the duty demand confirming liability for the second rolling mill could be sustained without considering the applicable capacity-determination rules and the departmental circular, and whether the matter required reconsideration by the adjudicating authority.

Analysis: The dispute turned on the effect of the Hot Re-Rolling Steel Mills Annual Capacity Determination Rules, 1997, which contemplate redetermination when there is a change in the installed machine, and the TRU circular dated 26 February 1999, which states that where one heating furnace feeds two rolling mills, the higher capacity of the two mills is to be taken as the assessed capacity of the unit. The order under challenge proceeded without examining those materials and treated the matter as though the assessee had admitted the duty liability, whereas the assessee's stand was that no further duty was payable because the second mill did not create a higher capacity than the first.

Conclusion: The demand could not be finally sustained on the existing record and the matter had to be reconsidered by the Commissioner after examining the relevant rules and circular and after granting personal hearing.

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