High Court quashes interest levy under Rule 96ZO, upholds excise duty. Abatement denial justified.

The High Court partly allowed the appeal by quashing the impugned orders demanding and confirming the levy of interest under Rule 96ZO due to the absence of a substantive provision in Section 3A of the Central Excise Act, 1944. However, the orders confirming the levy of excise duty were upheld. The denial of abatement under Section 3A(3) was justified as the Appellant failed to fulfill the conditions outlined in Rule 96ZO(2). The Court disposed of the Civil Application without costs.

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Issues Involved:
1. Levy of interest under Rule 96ZO in the absence of a substantive provision in Section 3A of the Central Excise Act, 1944.
2. Confirmation of demand based on annual production capacity without considering power cuts.
3. Denial of abatement under Section 3A(3) despite restricted supply to the manufacturer.

Detailed Analysis:

1. Levy of Interest under Rule 96ZO:
The primary issue was whether interest could be levied under Rule 96ZO in the absence of a substantive provision in Section 3A of the Central Excise Act, 1944. The Appellant argued that Rule 96ZO, which provided for the levy of interest, was ultra vires the parent Act since Section 3A did not contain any provision for the levy of interest. This contention was supported by the Supreme Court's decision in Shree Bhagwati Steel Rolling Mills vs. Commissioner of Central Excise, which held that interest could only be levied if explicitly provided for in the statute. The Revenue conceded this point, and the High Court agreed, stating that the Commissioner of Central Excise and the CESTAT were not justified in demanding and confirming the levy of interest. Consequently, the impugned orders demanding interest were quashed and set aside.

2. Confirmation of Demand Based on Annual Production Capacity:
The second issue was whether the confirmation of demand by the Tribunal, based on the annual production capacity determined by the Commissioner without considering power cuts, was perverse. The Appellant contended that the determination of production capacity did not account for severe power cuts, which was a relevant factor. However, the CESTAT noted that the Appellant had not challenged the determination of annual production capacity before it. The High Court found no reason to believe that the Appellant had challenged this determination, and since the Memo of Appeal was not produced, it concluded that the second substantial question of law did not arise or could not be decided in favor of the Assessee. The rulings in Bhuwalka Steel Industries Limited vs. Union of India and Shree Bhagwati Steel Rolling Mills were deemed inapplicable as there was no challenge to the determination of production capacity.

3. Denial of Abatement under Section 3A(3):
The third issue was whether the denial of abatement under Section 3A(3) was justified despite the Appellant's claim of restricted supply due to power cuts. Rule 96ZO(2) outlines the conditions for claiming abatement, including informing the authorities about the closure, providing electricity meter readings, and declaring the factory's closure period. The High Court found no evidence that the Appellant had fulfilled these conditions or followed the prescribed procedure. Therefore, the denial of abatement was upheld, and the third substantial question of law was answered against the Assessee.

Conclusion:
The appeal was partly allowed. The impugned orders demanding and confirming the levy of interest were quashed, but the orders confirming the levy of excise duty were upheld. There was no order as to costs, and the Civil Application was disposed of accordingly.

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