Annual production capacity must be re-determined pro rata when a dismantled mill is excluded from working machinery.

The Annual Capacity Determination Rules link annual production capacity to the working machinery in a re-rolling mill. Where one of two mills in the same premises is permanently closed and dismantled, the capacity cannot continue on the original full basis. The Tribunal distinguished authorities dealing with abatement under a different rule regime and treated them as inapplicable. It accepted that a pro rata redetermination is required when the machinery position changes, and the dismantled mill must be excluded from the capacity computation. The re-fixation of capacity was therefore directed in favour of the assessee.

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Issues: Whether the annual production capacity of the re-rolling mill was required to be re-fixed on a pro rata basis after one of the two mills in the same premises was closed and dismantled.

Analysis: The dispute turned on the application of the Annual Capacity Determination Rules to a situation where part of the machinery had ceased to function. The Tribunal distinguished decisions dealing with abatement under a different rule regime and held them inapplicable. It accepted the appellant's reliance on the capacity determination rules, which contemplate working machinery and permit a pro rata change where the machinery position changes. Since one mill had been dismantled and was no longer operational, the annual production capacity could not continue on the original full basis.

Conclusion: The annual production capacity had to be reduced by excluding the dismantled mill, and the re-fixation directed by the Tribunal was in favour of the assessee.

Ratio Decidendi: Where the capacity determination rules link annual production capacity to the working machinery, dismantling or permanent closure of one unit requires a corresponding pro rata re-determination of capacity.

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