Annual capacity determination must follow the statutory formula and actual production benchmark when uncertified parameter changes are claimed.

Annual capacity of a hot re-rolling steel mill had to be determined under the statutory formula in Rule 3, with Rule 4 governing prorata determination and Rule 5 requiring the higher actual 1996-97 production figure to prevail where it exceeded the computed capacity. A claimed change in machinery parameters could not displace that result because such change had legal relevance only if supported by departmental certification, which was absent. The revised determination on scrap had already addressed that grievance. The Tribunal's order was set aside and the Assessing Officer's capacity determination was restored.

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Issues: Whether the annual capacity of the hot re-rolling steel mill had to be determined by applying Rule 5 of the Hot Re-rolling Steel Mills Annual Capacity Determination Rules, 1997, and whether an alleged change in production parameters could be relied upon in the absence of departmental certification.

Analysis: The capacity was required to be determined under the statutory formula in Rule 3, with Rule 4 governing prorata determination and Rule 5 mandating that where the figure under Rule 3 is lower than the actual production for 1996-97, the higher actual production figure must be treated as the capacity. The grievance regarding inclusion of scrap had already been addressed in the revised determination. As to the change in machinery parameters, such change could have relevance only if certified by the Department, and no such certification was obtained. The binding effect of Rule 5 could not be ignored.

Conclusion: The annual capacity was rightly confirmed at the actual production figure, and the assessee was not entitled to relief on the basis of uncertified changes in parameters.

Final Conclusion: The Tribunal's order was set aside and the Assessing Officer's determination of annual capacity stood restored in favour of the Revenue.

Ratio Decidendi: Where the governing rules require actual production to prevail over a lower computed capacity, and a claimed change in parameters is unsupported by the required departmental certification, the statutory capacity determination must be upheld on the actual production benchmark.

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