Strict capacity calculation under re-rolling mill rules must use the prescribed d factor and the actual change date.

Capacity determination under the Hot Re-Rolling Steel Mills Annual Capacity Determination Rules, 1997 had to follow the prescribed formula strictly, so the d factor was to be taken as 160 mm and not averaged with any additional measurement. The rules contained no basis for introducing a separate d-1 factor or altering the verified pinion centre distance. Where the mill parameters were changed and the department was informed of the effective commencement date, refixation of annual capacity had to operate from the actual date of change, not from the later date of departmental verification. The revised capacity was therefore required to take effect from 1-6-99.

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Issues: (i) Whether the annual capacity of production under the Hot Re-Rolling Steel Mills Annual Capacity Determination Rules, 1997 was to be fixed by taking the d factor as 160 mm or by averaging it with an additional measurement. (ii) Whether the refixation of annual capacity could be made effective from the date of verification or only from the date on which the changed parameters actually came into force and were intimated.

Issue (i): Whether the annual capacity of production under the Hot Re-Rolling Steel Mills Annual Capacity Determination Rules, 1997 was to be fixed by taking the d factor as 160 mm or by averaging it with an additional measurement.

Analysis: The Rules prescribed the d factor as the pinion centre distance of the pinion stand connecting the last rolling mill drive of the finishing mill, excluding any pinch roll. The verification itself recorded the relevant pinion centre distance as 160 mm. There was no basis in the Rules for introducing a separate d-1 factor or for averaging two measurements in the absence of any such statutory concept. The capacity determination therefore had to follow the measure actually contemplated by the Rules.

Conclusion: The d factor was required to be taken as 160 mm and not as 164.5 mm. This issue was decided in favour of the assessee.

Issue (ii): Whether the refixation of annual capacity could be made effective from the date of verification or only from the date on which the changed parameters actually came into force and were intimated.

Analysis: The change in the pinion centre distance was permitted earlier, the assessee intimated the proposed effective date, and subsequently informed the department that production had commenced with the changed parameters from 1-6-99. The earlier remand direction required refixation from the date of actual change in the parameters, not from the date of departmental verification. Since the department was informed of the change and commencement, the effective date could not be postponed to the verification date.

Conclusion: The refixation had to operate from 1-6-99, the date of actual change in parameters, and not from 12-10-99. This issue was decided in favour of the assessee.

Final Conclusion: The impugned order was unsustainable, the annual production capacity had to be recalculated on the correct d factor, and the revised capacity was to take effect from the date of actual change in the mill parameters.

Ratio Decidendi: Capacity determination under delegated fiscal rules must be made strictly according to the prescribed formula, and when a change in parameters is duly effected and intimated, the revised determination operates from the actual date of change rather than from the later date of verification.

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