2003 (12) TMI 559 - AT - Central Excise

Steel mill duty demand upheld by Tribunal due to production capacity discrepancy, penalty imposed for evasion.

The Tribunal determined that the duty demand based on the higher annual capacity of production for a steel mill was justified from the date of the ... Production capacity based duty - Annual capacity of production - Interest and penalty Issues:1. Determination of annual capacity of production for a steel mill under the central excise duty scheme.2. Discrepancy in the declared parameters of the re-rolling mill leading to a demand for differential duty, penalty, and interest.3. Appellant's contention regarding the repair of the mill and its impact on the duty demand.4. Justification of duty demand based on the higher annual capacity of production.5. Compliance with the compounded levy rules and imposition of penalty for deliberate evasion of duty.Analysis:1. The case involves the determination of the annual capacity of production for a steel mill under the central excise duty scheme. The appellant, a producer of non-alloy steel, opted for a scheme where duty liability was based on the production capacity of the re-rolling mill. The initial order dated 20-11-97 determined the annual capacity as 1113.990 MT based on specific parameters declared by the assessee. However, a discrepancy was found during a subsequent visit by Central Excise officers, leading to the initiation of proceedings to recover a differential duty amount.2. The appellant contended that the discrepancy in parameters was due to a gear breakdown on 14-2-98, resulting in higher dimensions. They claimed that no duty demand was due before this date and provided documentation to support their argument. The appellant also highlighted inconsistencies in the Commissioner's approval of the original declaration and the subsequent findings regarding the parameters of the re-rolling mill.3. During the hearing, the appellant's counsel presented evidence supporting the repair of the mill and emphasized that the duty demand until November 1997 could not be justified based on the Commissioner's earlier approval. However, the respondent argued that the appellant's explanation regarding the repair was unreliable, pointing out internal contradictions in their submissions and the lack of corroborating evidence.4. The Tribunal examined the evidence and concluded that the case involved an enhancement of the mill's capacity through parameter upgrades. They determined that the duty demand based on the higher annual capacity was only applicable from the date of the original order in November 1997. The Tribunal found discrepancies in the appellant's version regarding the repair and concluded that the duty demand for the period after the original order was justified.5. Furthermore, the Tribunal noted that any changes affecting the annual capacity of the re-rolling mill should have prior approval from the Central Excise authority, which the appellant failed to obtain. This failure constituted deliberate evasion of duty, justifying the imposition of a penalty. Despite confirming the duty demand, the Tribunal reduced the penalty amount and upheld the demand for interest, thereby affirming the impugned order with modifications based on the revised duty amount and penalty.