2001 (12) TMI 713 - AT - Central Excise

Tribunal clarifies annual capacity rule under Central Excise Act, sets aside impugned orders

The Tribunal allowed applications for condonation of delay, waived the pre-deposit requirement, and clarified the determination of annual capacity of ... Production capacity based duty - Iron and steel products Issues Involved:1. Condonation of delay.2. Requirement of pre-deposit.3. Determination of annual capacity of production under Section 3A of the Central Excise Act, 1944.4. Applicability of Rule 5 of the Hot Re-Rolling Steel Mills Annual Capacity Determination Rules, 1997.Detailed Analysis:1. Condonation of Delay:Applications for condonation of delay were filed by several steel industries, which were allowed due to valid reasons such as the closure of units and the misplacement of the appeal file by the counsel for one applicant. This decision was made to ensure that the appeals could be heard on their merits despite procedural delays.2. Requirement of Pre-Deposit:The Tribunal waived the requirement of pre-deposit for the stay applications and appeals. This decision was based on the fact that the issue in dispute had already been settled by a Larger Bench of the Tribunal in the case of Sawan Mal Shibumal Steel Rolling Mills v. CCE, Chandigarh.3. Determination of Annual Capacity of Production:The appellants, manufacturers of hot re-rolled products of non-alloy steel, were liable to pay duty at compounded rates as per Section 3A of the Central Excise Act, 1944. The duty was determined based on the annual capacity of production or relevant factors. The Hot Re-Rolling Steel Mills Annual Capacity Determination Rules, 1997, provided the method for determining this capacity. The appellants had opted for payment of duty on a compounded basis. However, the Commissioner had ordered that the annual capacity be deemed equal to the production during the financial year 1996-97, as per Rule 5, because the determined capacity was less than the actual production.4. Applicability of Rule 5:The core issue was whether Rule 5, which allows the adoption of actual production from the financial year 1996-97, applies in cases where there is a change in machinery leading to a reduction in annual capacity. The appellants contended that Rule 5 should not apply in such cases and that Rule 4(2) should be applicable instead. The Tribunal, referencing the Larger Bench decision, held that Rule 5 does not apply when there is a reduction in annual capacity due to changes in machinery. Rule 5 is only applicable where there is no change in annual capacity or where the capacity increases due to changes in machinery. Since the change in parameters resulted in a reduction of annual capacity, Rule 5 was deemed irrelevant, and the actual production of 1996-97 could not be adopted.Conclusion:The Tribunal set aside the impugned orders and allowed the appeals by remanding the cases to the jurisdictional Assistant Commissioner. The Assistant Commissioner was directed to work out the duty liability in light of the guidelines provided, ensuring that Rule 5 is not applied in cases of reduced annual capacity due to changes in machinery. The details of each appeal were documented in Annexure 'A' to the order.