Finalised capacity determination binds excise duty recovery for past periods; penalty may still be reduced on separate scrutiny.

Finalised annual capacity determination under Section 3A of the Central Excise Act and Rule 96ZQ bound the assessee once its challenge failed as time-barred, so duty could be recovered for the earlier period on the basis of the amended show cause notices. The assessee could not rely on decisions in other matters to override the final order in its own case. The duty demand for the relevant past period was upheld. Penalty was treated separately from duty liability, and the equal penalty was found excessive on the facts; it was reduced to one lakh rupees.

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Issues: (i) Whether duty based on the finally determined annual capacity of production could be recovered for the past period on the basis of the earlier show cause notices and amended corrigenda, and whether the assessee could rely on decisions in other cases after its own capacity-determination order had attained finality; (ii) Whether penalty equal to the duty confirmed was sustainable.

Issue (i): Whether duty based on the finally determined annual capacity of production could be recovered for the past period on the basis of the earlier show cause notices and amended corrigenda, and whether the assessee could rely on decisions in other cases after its own capacity-determination order had attained finality.

Analysis: The annual capacity had been determined provisionally and later finalised, and the final order had attained finality because the assessee's appeal against it was dismissed as time-barred. Once that determination became final, the assessee was bound to discharge duty in accordance with that order. The scheme under Section 3A of the Central Excise Act, 1944 and Rule 96ZQ of the Central Excise Rules, 1944 did not support the plea that duty could arise only prospectively from the date of final determination. The amended show cause notices were held to be part of the continuing re-adjudication process, and the assessee could not invoke decisions rendered in other matters to displace a final order in its own case.

Conclusion: The demand of duty for the relevant past period was upheld against the assessee.

Issue (ii): Whether penalty equal to the duty confirmed was sustainable.

Analysis: Although the duty demand was sustained, the circumstances did not justify imposition of penalty equivalent to the entire confirmed duty. The penalty was examined independently of the duty liability, and the quantum was found excessive on the facts of the case.

Conclusion: The penalty was reduced to one lakh rupees in favour of the assessee.

Final Conclusion: The duty demand was sustained, but the penalty was substantially reduced, resulting in only partial relief to the assessee.

Ratio Decidendi: A duty determination that has attained finality binds the assessee, and recovery may proceed on that basis even for the earlier period, while penalty remains subject to separate scrutiny on the facts of the case.

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