2010 (5) TMI 449 - AT - Central Excise

Manufacturer's Duty Upheld Under Compounded Levy Scheme: Importance of Compliance & Proper Procedures

The Tribunal upheld the duty demand, penalties, and interest imposed on a manufacturer of non-alloy steel ingots/billets under the Compounded Levy Scheme. ... Production caacity based duty – Re-determination of duty – Assessee once opting for compounded levy scheme, not entiteled to opt out before expiry of financial year – in order to opt out of the scheme and/or get the annual capacity of the furnace determined, the assessee has to approach the competent authority in that regard and invite an order modifying the determination of the capacity of production - no such order was obtained by the respondents - Commissioner (Appeals) was not the competent authority in this regard - Commissioner (Appeals) clearly erred in giving concession to the respondents in the duty liability contrary to the provisions of Section 3A read with the provisions of Rule 96-ZO – appeal allowed and order set aside Issues:- Determination of duty liability under Compounded Levy Scheme- Applicability of Rule 96-ZO and Section 3A(4) of the Central Excise Act, 1944- Authority to redetermine duty liability- Failure to obtain an order modifying the determination of production capacity- Challenge to the Commissioner (Appeals) decisionAnalysis:1. Determination of Duty Liability under Compounded Levy Scheme:The case involved a dispute regarding the duty liability of a manufacturer of non-alloy steel ingots/billets under the Compounded Levy Scheme. The respondents failed to discharge their duty liability for a specific period, leading to the issuance of show cause notices demanding payment along with interest and penalties.2. Applicability of Rule 96-ZO and Section 3A(4) of the Central Excise Act:The respondents contended that they were not required to pay duty as per the Compounded Levy Scheme due to operating below full capacity. However, the adjudicating authority upheld the duty demand based on the fixed production capacity determined by the Commissioner. The Commissioner (Appeals) considered relevant legal precedents and held that the respondents had opted out of the Scheme, relieving them of duty liability from a certain date.3. Authority to Redetermine Duty Liability:The appellant argued that the Commissioner (Appeals) did not have the authority to re-determine duty liability based on actual production, as the respondents had not followed the proper procedure under Section 3A(4) of the Act. The appellant emphasized that the annual capacity of production had been determined, and the respondents were bound by this determination unless a valid claim for re-determination was made.4. Failure to Obtain an Order Modifying Production Capacity:It was highlighted that the respondents did not obtain an order modifying the determination of production capacity as required under the law. The absence of such an order meant that the respondents were obligated to pay duty based on the initial determination, and the Commissioner (Appeals) erred in granting concessions contrary to the statutory provisions.5. Challenge to the Commissioner (Appeals) Decision:The appellant successfully challenged the decision of the Commissioner (Appeals) by demonstrating that the respondents had not followed the prescribed procedures for re-determination of duty liability. The Tribunal set aside the impugned order, confirming the duty demand and penalties imposed by the adjudicating authority.In conclusion, the judgment clarified the obligations of manufacturers under the Compounded Levy Scheme, emphasizing the importance of following statutory procedures for redetermination of duty liability. The Tribunal upheld the duty demand, penalties, and interest, underscoring the significance of compliance with legal provisions in excise matters.