2012 (7) TMI 446 - AT - Central Excise

Tribunal overturns Commissioner's decision, finding lack of merit in annual production capacity assessment.

The Tribunal set aside the Commissioner's decision and allowed the appellant's appeal due to the lack of merit in fixing the annual production capacity ... Applicability of compounded levy scheme - determination of annual production capacity - Commissioner has fixed the annual capacity of production of the appellant under the Hot Re-Rolling Steel Mills Annual Capacity Determination Rules, 1997 on the basis of the report dated 25.09.1997 of the Superintendent of central excise - Superintendent has accepted all other parameters except the d -factor which according to him was 170 MT and not 155 MT – Held that:- Superintendent while discharging his statutory function under the provisions of law ought to have been meticulous and careful as the verification done by him would be crucial for determination of the annual capacity of production, the basis for payment of duty by the appellant/assessee - there cannot be any assumptions and presumptions in justifying an improper verification report by the said Superintendent which got regularized by him consequent to the failure on the part of the senior officers to get the joint verification completed on 17.10.1997 - order set aside and appeal filed by the appellant allowed Issues:- Annual capacity of production determination based on verification report- Authority of Superintendent for verification of parameters- Acceptance of verification report by the Commissioner- Lack of demand issued post fixation of annual capacity- Closure of factory and cessation of productionIssue 1: Annual capacity of production determination based on verification reportThe appeal was filed against an Order-in-Original passed by the Commissioner of Central Excise, Ranchi regarding the annual capacity of production of the appellant. The appellant, engaged in manufacturing bars and rods of non-alloy steel, had filed declarations related to their production capacity. The Superintendent of Central Excise verified the parameters and fixed the annual capacity at 1284.880 MT based on a report dated 25.09.1997. The appellant disputed the report, particularly the d-factor discrepancy. The Tribunal noted the absence of a declaration dated 15.09.1997 by the appellant as mentioned in the report. The Commissioner accepted the report despite the appellant's objections, leading to the appeal.Issue 2: Authority of Superintendent for verification of parametersThe appellant argued that the Superintendent was not the appropriate authority for verifying parameters to determine annual production capacity. The appellant contended that the verification was unilaterally done by the Superintendent, and the subsequent report was endorsed by a third party. The appellant emphasized that the report should not be the sole basis for fixing the annual production capacity. The Tribunal considered the meticulousness required in such verifications, emphasizing the importance of accurate reports for duty payment purposes.Issue 3: Acceptance of verification report by the CommissionerThe Commissioner accepted the Superintendent's report despite the appellant's objections and discrepancies highlighted by the appellant's advocate. The Tribunal analyzed the Commissioner's reasoning for accepting the report, noting the lack of joint verification due to the factory's dismantled condition. The Tribunal found merit in the Commissioner's decision to accept the report, emphasizing the statutory duty of the Superintendent to conduct meticulous verifications crucial for determining production capacity.Issue 4: Lack of demand issued post fixation of annual capacityThe Tribunal noted that no central excise duty demand was issued following the fixation of the annual production capacity by the adjudicating authority. The appellant's factory had been closed since 01.09.1997, with no production occurring after that date. The lack of demand post-fixation indicated that the annual capacity determination had become academic, leading the Tribunal to question the purpose of a second remand in such circumstances.Issue 5: Closure of factory and cessation of productionThe appellant's factory had been closed since 01.09.1997, with no production recorded after that date. The Tribunal considered this cessation of production in conjunction with the dismantled condition of the rolling mill during a joint verification visit. This situation, along with the lack of demand issued post-fixation, led the Tribunal to conclude that a second remand would not serve any purpose. Consequently, the Tribunal set aside the impugned order and allowed the appeal filed by the appellant, considering the lack of merit in the fixation of annual production capacity based on a verification report that lacked confidence.