Deeming fiction in capacity rules cannot be extended to later years, and a delayed excise demand remains time-barred.

Rule 3(3) required annual capacity of production to be determined by the prescribed formula, while Rule 5 created a deeming fiction only for 1996-97 where actual production exceeded that capacity. That deeming provision could not be extended to treat 1996-97 actual production as the capacity for later years, nor justify retrospective revision for 1997-98 and 1998-99. The demand based on that approach was therefore unsupported by the Rules. The differential duty demand was also barred by limitation because the show cause notice was issued long after the relevant period, and the time-bar finding was upheld.

---

---

Issues: (i) Whether Rule 5 of the Hot Rerolling Steel Mills Annual Capacity Determination Rules, 1997 could be used to fix the annual capacity of production for subsequent years on the basis of actual production for financial year 1996-97, and whether such fixation could operate retrospectively; (ii) Whether the demand for differential duty was barred by limitation.

Issue (i): Whether Rule 5 of the Hot Rerolling Steel Mills Annual Capacity Determination Rules, 1997 could be used to fix the annual capacity of production for subsequent years on the basis of actual production for financial year 1996-97, and whether such fixation could operate retrospectively.

Analysis: The annual capacity of production was required to be determined under Rule 3(3) by the prescribed formula. Rule 5 created a deeming fiction only for the financial year 1996-97 where actual production exceeded the capacity determined under Rule 3(3). That deeming provision did not authorise the actual production of 1996-97 to be treated as the annual capacity for later years, nor did it permit a retrospective review of the earlier determination for subsequent assessment periods. The later demand based on treating the 1996-97 actual production as the capacity for 1997-98 and 1998-99 was therefore not supported by the Rules.

Conclusion: The Revenue's contention on retrospective fixation and application of Rule 5 for subsequent years was rejected.

Issue (ii): Whether the demand for differential duty was barred by limitation.

Analysis: The show cause notice was issued long after the relevant period, and the Tribunal's finding that the demand for differential duty for 1997-98 and 1998-99 was time-barred did not suffer from illegality. The record did not disclose any basis to disturb that finding.

Conclusion: The demand was held to be barred by limitation.

Final Conclusion: The petition failed on merits and on limitation, and the dismissal of the Revenue's challenge was upheld.

Ratio Decidendi: A deeming provision fixing annual capacity for a specified period cannot be extended to later periods unless the statute expressly so provides, and a time-barred excise demand cannot be sustained.

---