Cooling zone exclusion from stenter chamber count under annual capacity rules makes the demand unsustainable.

For annual capacity determination under the compounded levy scheme, the cooling zone of a hot air stenter could not be treated as a chamber. The applicable explanation to rule 5 of the Hot Air Stenter Independent Textile Processors Annual Capacity Determination Rules, 1998 required the equipment to be installed in or attached to the stenter and to aid heat setting or drying of fabrics before it could qualify as a chamber. Because the cooling zone was neither installed in nor attached to the stenter and only cooled fabrics after they left the chambers, its inclusion in the chamber count was legally incorrect, and the resulting demand was unsustainable.

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Issues: Whether the cooling zone of a hot air stenter could be counted as a chamber while determining annual capacity under the compounded levy scheme.

Analysis: The applicable explanation to rule 5 of the Hot Air Stenter Independent Textile Processors Annual Capacity Determination Rules, 1998 required the equipment to be installed in or attached to the stenter and to aid the process of heat setting or drying of fabrics before it could be treated as a chamber. The cooling zone was found neither to be installed in nor attached to the stenter, and it only cooled the fabrics after they came out of the chambers. On that basis, inclusion of the cooling zone in the chamber count was held to be legally incorrect.

Conclusion: The cooling zone could not be included while computing the number of chambers for annual capacity determination, and the demand based on such inclusion was unsustainable in favour of the assessee.

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