Annual capacity fixation under compounded levy failed where the verification report was unreliable and inconsistent with the record.

Annual capacity fixation under the Hot Re-Rolling Steel Mills Annual Capacity Determination Rules, 1997 could not rest on an unreliable Superintendent's verification report. The report did not match the earlier declarations, the stated declaration date was not traceable in the record, and a later endorsement by a third person undermined its credibility. Because verification was central to determining duty liability under the compounded levy scheme, the report had to be meticulous and dependable; it was not. The fixation was therefore set aside in favour of the assessee, with the tribunal also noting that no duty demand had followed and the mill had already been dismantled and closed.

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Issues: Whether the fixation of annual capacity of production under the Hot Re-Rolling Steel Mills Annual Capacity Determination Rules, 1997 could be sustained on the basis of the Superintendent's verification report.

Analysis: The annual capacity was fixed on the strength of a verification report said to have been prepared on the basis of a visit made by the Superintendent. The report did not tally with the declarations earlier filed, the stated declaration date in the report was not found on record, and the report had been endorsed later by a third person in circumstances that did not inspire confidence. Since the verification was crucial for determining the duty liability under the compounded levy scheme, the report had to be meticulous and reliable. The Court also noted that no duty demand had followed the fixation and that the mill had already been dismantled and closed, making the exercise largely academic.

Conclusion: The fixation of annual capacity based on the Superintendent's report could not be sustained and was set aside in favour of the assessee.

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