2005 (10) TMI 465 - AT - Central Excise

Tribunal corrects Commissioner's error on Annual Capacity of Production, ruling in favor of assessee.

The Tribunal ruled in favor of the assessee in a case involving the determination of Annual Capacity of Production (ACP) for a steel mill under Rule 3 and ... Production capacity based duty - Penalty Issues:1. Determination of Annual Capacity of Production (ACP) under Rule 3 and Rule 5 of the Hot Re-rolling Steel Mill Annual Capacity Determination Rules, 1997.2. Imposition of penalty under Rule 96 ZP of the Central Excise Rules, 1944.Issue 1: Determination of ACP under Rule 3 and Rule 5:The case involved appeals by both the assessee and the Revenue against the Commissioner (Appeals)'s order regarding the determination of the Annual Capacity of Production (ACP) for a steel mill. Initially, the ACP was provisionally determined at 880.052 MTs under Rule 3 based on furnace parameters declared by the assessee. Subsequently, the ACP was revised to 1691 MTs under Rule 5 due to higher production in the previous year. The High Court had stayed the operation of orders passed by the Commissioner under Rule 5. During this period, the assessee paid duty based on the ACP determined under Rule 3, which was acceptable to the department. Despite finalizing the ACP at 1691 MTs during the pendency of Writ Petitions, the Commissioner allowed the assessee to pay duty at the lower rate due to the High Court's stay order. The Commissioner's finalization order was reconfirmed after the Writ Petitions were dismissed. The Tribunal found that the Commissioner (Appeals) had erred in his findings, vacated the penalty, and allowed the assessee's appeal, dismissing the Revenue's appeal for a higher penalty.Issue 2: Imposition of Penalty under Rule 96 ZP:The department issued demand notices during the pendency of the Writ Petitions to 'keep the matter alive,' which were confirmed by the Deputy Commissioner after the finalization of ACP. The Deputy Commissioner refrained from imposing a penalty, but the department sought to penalize the assessee for the alleged default of duty payment. The Commissioner (Appeals) imposed a penalty of Rs. 1.55 lakhs under Rule 96 ZP. The department appealed to enhance the penalty to the maximum amount equal to the duty, while the assessee challenged the penalty in a separate appeal. The Tribunal found that the penalty was based on erroneous findings by the Commissioner (Appeals) and vacated it, allowing the assessee's appeal and dismissing the Revenue's appeal for a higher penalty.In conclusion, the Tribunal's judgment addressed the issues of ACP determination under Rule 3 and Rule 5, as well as the imposition of a penalty under Rule 96 ZP. The Tribunal corrected the erroneous findings of the Commissioner (Appeals) and ruled in favor of the assessee, vacating the penalty and dismissing the Revenue's appeal for a higher penalty.