Capacity-based excise demand fails when closure evidence is not examined; consequential duty and penalty are remanded.

A capacity-based excise levy cannot be sustained where the assessee's evidence that one induction furnace had broken down and remained closed was not examined. The authority was required to verify the factual claim, consider the documentary material, and record findings before rejecting refixation of annual capacity or abatement of duty. Because the duty demand and penalty were consequential to that disputed capacity fixation, they also fell once the foundation order was set aside. The matters were remanded for fresh adjudication and speaking orders after hearing the assessee.

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Issues: (i) Whether the annual capacity of production fixed at 14,400 MT could be sustained without examining the assessee's evidence that one induction furnace had broken down and remained closed, and whether the claim for refixation of capacity or abatement of duty was rightly rejected; (ii) whether the duty demand and penalty founded on that capacity fixation could survive.

Issue (i): Whether the annual capacity of production fixed at 14,400 MT could be sustained without examining the assessee's evidence that one induction furnace had broken down and remained closed, and whether the claim for refixation of capacity or abatement of duty was rightly rejected.

Analysis: The appellate authority held that the Commissioner, after remand, did not examine the documentary material produced by the assessee regarding the breakdown and closure of one furnace. The authority noted that the remand required a fresh decision on the claim for abatement and factual verification of whether the factory was operating only one furnace during the relevant period. It was found that the Commissioner had refused relief mainly on the basis of procedural conditions, without addressing the evidence or recording findings on the factual claim for refixation of capacity.

Conclusion: The rejection of the claim for refixation of annual capacity and abatement could not be sustained, and the capacity fixation order was set aside with a direction for fresh adjudication.

Issue (ii): Whether the duty demand and penalty founded on that capacity fixation could survive.

Analysis: The duty demand and penalty were consequential to the disputed annual capacity fixation. Once that fixation was held unsustainable, the foundation for both the demand and the penalty disappeared. The same reasoning was applied to the connected order confirming duty and penalty for the later period as well.

Conclusion: The duty demand and penalty could not be sustained and were set aside, with the matter remanded for de novo consideration after hearing the assessee.

Final Conclusion: The appeals succeeded to the extent that the impugned capacity-based demands and penalties were annulled, and the matters were sent back for fresh speaking orders after proper consideration of the evidence and hearing.

Ratio Decidendi: Where a capacity-based levy is challenged on the factual ground that part of the plant was closed, the adjudicating authority must examine the evidence and record findings before confirming capacity, abatement refusal, or consequential demand and penalty.

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