Capacity-based excise duty demand upheld where the annual production capacity order was unchallenged and no limitation bar applied.

Duty based on an unchallenged annual capacity determination under the Hot Re-rolling Steel Mills Annual Capacity Determination Rules, 1997 was upheld because the assessee had opted for payment under Rule 96ZP(3) and could not dispute liability by referring to actual production or furnace type. The demand was also not barred by limitation, as Rule 96ZP of the Central Excise Rules, 1944 was treated as a self-contained provision and did not prescribe any limitation period; reference to Section 11A did not alter that position. The duty demand was therefore sustained in full.

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Issues: (i) whether duty could be demanded on the basis of the Annual Capacity of Production determined under the relevant rules when that determination was not challenged, and (ii) whether the demand was barred by limitation.

Issue (i): whether duty could be demanded on the basis of the Annual Capacity of Production determined under the relevant rules when that determination was not challenged.

Analysis: The liability to pay duty arose from the capacity determination made under Rule 3 of the Hot Re-rolling Steel Mills Annual Capacity Determination Rules, 1997 and the assessee had opted for payment under Rule 96ZP(3) of the Central Excise Rules, 1944. The capacity order was never challenged before the appropriate forum. In the absence of any challenge to that determination, the assessee could not question duty liability by relying on actual production or on the type of furnace used. The duty demand therefore followed from the unassailed capacity determination.

Conclusion: The issue was decided against the assessee and in favour of Revenue.

Issue (ii): whether the demand was barred by limitation.

Analysis: The demand was made under Rule 96ZP of the Central Excise Rules, 1944, which operated as a self-contained provision and did not prescribe any limitation period. The mere reference to Section 11A of the Central Excise Act, 1944 did not create a limitation bar for a demand substantively founded on Rule 96ZP. The plea of limitation therefore could not succeed.

Conclusion: The issue was decided against the assessee and in favour of Revenue.

Final Conclusion: The demand of duty was sustained in full and the assessee's appeal failed.

Ratio Decidendi: Where duty is demanded under a self-contained capacity-based excise provision and the underlying capacity determination is not challenged, the assessee cannot resist the demand by disputing actual production, and a limitation defence is unavailable unless the governing provision itself prescribes one.

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