2014 (12) TMI 1080 - AT - Central Excise

Appellate Tribunal overturns department's demand for differential duty, citing absence of final order and relevant sections.

MAHAMAYA STEEL INDUSTRIES LTD. Versus COMMR. OF C. EX. & ST., RAIPUR

The High Court directed the appellant to appeal to the Appellate Tribunal, which found the department's recovery of differential duty baseless due to the ... Compounded Levy Scheme of Section 3A of the Central Excise Act, 1944 read with Rule 96ZO - determination of the annual capacity of production of the appellant - Held that:- When the appellant had informed the department from the very beginning that they are operating only one furnace w.e.f. 1-3-2001 and other furnace of 1.00 M.T. capacity is idle, and when initially the duty liability had been determined provisionally on the basis of both the furnaces being operational, the Commissioner should have passed a final order determining their annual capacity of production after considering the appellant’s representation that the other furnace has never been operated and is lying idle. But no final order was passed. Thus, the department’s action of recovery of differential duty is without any basis. Even if this matter is remanded for re-determination of capacity of production and their duty liability, in view of the judgment of the Hon’ble Gujarat High Court in the case of Krishna Processors (2012 (11) TMI 954 - GUJARAT HIGH COURT), the proceedings for recovery of differential duty, if any, cannot be initiated - order of the department demanding the differential duty is set aside - Decided in favour of assessee. Issues:1. Determination of duty liability based on the capacity of production of the appellant's furnaces.2. Validity of the department's demand for payment of the differential duty.3. Applicability of Section 3A of the Central Excise Act, 1944 and relevant rules post their omission.Analysis:1. The appeal challenged the Commissioner's order dated 21-1-1998, which determined the appellant's annual production capacity and monthly duty liability provisionally. The Commissioner considered both furnaces, one of 3.5 M.T. and the other of 1 M.T., despite the appellant's assertion that the 1 M.T. furnace was non-functional. The appellant had paid duty based on the 3.5 M.T. furnace's capacity. The High Court directed the appellant to appeal to the Appellate Tribunal. The Tribunal noted the appellant's representation that only the 3.5 M.T. furnace was operational, and the 1 M.T. furnace was idle. The Tribunal found the department's recovery of differential duty baseless due to the absence of a final order considering the representation.2. The Tribunal referenced the judgment of the Hon'ble Gujarat High Court in the case of Krishna Processors, which stated that post the omission of Section 3A of the Central Excise Act, 1944 and relevant rules without saving clauses, no recovery proceedings could be initiated. As the appellant had continually informed the department about the non-operational status of the 1 M.T. furnace and no final order was passed considering this information, the department's demand for differential duty lacked a legal basis. The Tribunal set aside the department's order for demanding the differential duty, allowing the appeal and stay application.3. The Tribunal emphasized that the omission of Section 3A of the Central Excise Act, 1944 and relevant rules without saving clauses prevented the initiation of recovery proceedings post their omission. Given the appellant's consistent communication regarding the non-functionality of the 1 M.T. furnace and the absence of a final order addressing this, any demand for differential duty was deemed invalid according to the judgment in the case of Krishna Processors. Consequently, the Tribunal ruled in favor of the appellant, setting aside the department's order and allowing the appeal and stay application.