Ultra vires challenge to capacity rules did not extend across different notifications; matter remanded for merits reconsideration.

A declaration striking down one capacity-determination rule did not automatically invalidate a separate rule framed under the same statutory provision. The earlier High Court ruling concerned the Hot Air Stenter Independent Textile Processor Annual Capacity Determination Rules, 1998, whereas the present dispute involved the Hot Re-rolling Steel Mills Annual Capacity Determination Rules, 1997 issued under a different notification. Because no High Court or the Supreme Court had held the 1997 Rules ultra vires, the earlier decision could not be applied to sustain the setting aside of the demand. The matter was required to be reconsidered on merits in compliance with natural justice, and the order setting aside the adjudication was not sustained; the case was remanded to the Commissioner (Appeals).

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Issues: Whether the benefit of the decision striking down a different capacity determination rule could be extended to the Hot Re-rolling Steel Mills Annual Capacity Determination Rules, 1997, and whether the order setting aside the demand could be sustained on that basis.

Analysis: The dispute turned on the scope of the earlier High Court ruling on the Hot Air Stenter Independent Textile Processor Annual Capacity Determination Rules, 1998 issued under a different notification. The rules applicable in the present matter were the Hot Re-rolling Steel Mills Annual Capacity Determination Rules, 1997 issued under a different notification. A declaration that one set of rules issued under section 3A of the Central Excise Act, 1944 was ultra vires did not automatically invalidate every rule framed under the same provision. As no High Court or the Supreme Court had held the 1997 Rules to be ultra vires, the earlier decision was not applicable to the facts of the case. The matter therefore required reconsideration on merits after observing the principles of natural justice.

Conclusion: The order setting aside the adjudication was not sustained, and the matter was remanded to the Commissioner (Appeals) for fresh decision on merits.

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