Annual capacity determination cannot rely on a dismantled furnace when evidence of prior removal was ignored.

Annual capacity for a hot re-rolling mill could not be fixed by relying on a furnace that had already been dismantled before the capacity-determination rules came into force, especially where the assessee had informed the department and produced supporting documents. Because the adjudicating authority did not examine that evidence, the capacity assessment was not properly made. The matter therefore required reconsideration, and re-determination in accordance with law was permissible where a change in capacity is established and communicated. The capacity determination was set aside and the case remanded for de novo adjudication after considering the assessee's evidence and the applicable legal position.

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Issues: Whether the annual capacity of the hot re-rolling mill could be determined by taking into account a furnace that had already been dismantled before the relevant rules came into force, and whether the matter required remand for reconsideration of the assessee's evidence.

Analysis: The assessee had intimated the department about dismantling of one furnace and had produced material to support that the furnace ceased to exist before the rules governing annual capacity determination came into operation. The impugned order did not consider the documentary evidence on record. In such circumstances, annual capacity determination based on the dismantled furnace could not be treated as properly made. Since the relevant evidence had not been examined and the assessee's claim could affect the duty liability, the matter required reconsideration. The Tribunal also noted that where a change in capacity is established and informed to the department, re-determination in accordance with law is permissible.

Conclusion: The determination of annual capacity was set aside and the matter was remanded for de novo adjudication after considering the assessee's evidence and the applicable legal position.

Ratio Decidendi: Where evidence shows that a component affecting production capacity had been dismantled before the relevant capacity-determination regime came into force, and such evidence was not considered by the adjudicating authority, the assessment must be reconsidered de novo in accordance with law and natural justice.

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