Provisional annual capacity cannot sustain excise duty demand before final determination under the capacity-based scheme.

Excise duty under the capacity-based scheme could not be confirmed on a provisional annual capacity figure because final determination of production capacity was a precondition to crystallising liability. Where the capacity remained only provisionally fixed and the record showed that the matter was still open, any duty demand based on that interim figure was premature. Consequential penalty could not survive on the same basis. The demand was therefore not sustainable until the annual capacity of production was finally determined.

---

---

Issues: Whether the demand of excise duty and consequential penalty could be sustained when the annual capacity of production had only been determined provisionally and no final determination had yet been made.

Analysis: The duty liability under the capacity-based scheme depended upon a final determination of the annual capacity of production. The record showed that the capacity had been fixed only on a provisional basis and that the matter had remained open even after judicial directions. In such circumstances, a demand founded on that provisional figure could not be confirmed before the capacity was finally determined.

Conclusion: The demand of duty was premature and could not be upheld until the annual capacity of production was finally determined. The appeal succeeded.

---