2019 (1) TMI 906 - AT - Central Excise

Appellants Granted Duty Abatement for Factory Closure Periods

M/s. Sainath Steels Versus The Commissioner of Central Excise

The Tribunal held that the appellants were entitled to abatement of duty for periods of factory closure under Section 3A(4) of the Central Excise Act, ... Valuation - annual capacity of production - abatement of duty - closure of factory - intimation of closure filed timely - whether the appellants are entitled for abatement of duty as provided sub-section (4) of Section 3A of Central Excise Act, 1944? - Held that:- We do not find that the appellants have opted for the operation under Rule 96ZP. The Revenue did not produce any evidence to contradict the same. We find that there is a provision under Section 3A(4) for redetermination of amount of duty where the assessee claims that the actual production of notified goods in his factory is lower than the production determined under sub-section (2). Hon’ble Supreme Court in the case of M/S. BHUWALKA STEEL INDUSTRIES LTD. & ANOTHER VERSUS UNION OF INDIA & OTHERS [2017 (3) TMI 1357 - SUPREME COURT OF INDIA] has laid emphasis on the fact that the conditions of Rule 96ZP are not eternal. If the appellant has to pay duty even when there was no production in the factory, it leads to illogical conclusions. The provisions of Rule 96ZP do not take away the right of the assessee from exercising a facility given under Section 3A. It is found that in case the appellants have not opted for Rule 96ZP, they are governed by Section 3A(4) and the authorities are bound to examine their claim of closure of the factory and to give abatement of the duty - There is nothing shown on record that the appellant’s request was considered by the Revenue and an order has been passed after giving a due opportunity to the appellants. Therefore, there is no merit in the order passed by Commissioner (A) - the contentions of the appellant is correct that they are liable to pay duty for the period of 58 days and accordingly, the balance duty of ₹ 1,23,990/- is confirmed - penalty set aside - appeal allowed - decided in favor of appellant. Issues Involved:1. Entitlement for abatement of duty under Section 3A(4) of the Central Excise Act, 1944.2. Applicability of Rule 96ZP(3) of the Central Excise Rules, 1944.3. Calculation of duty liability for periods of factory closure.4. Validity of penalties imposed under Rule 96ZP(3) and Rule 173Q.Issue-Wise Detailed Analysis:1. Entitlement for Abatement of Duty:The primary issue is whether the appellants are entitled to abatement of duty as provided under sub-section (4) of Section 3A of the Central Excise Act, 1944. The appellants contended that they had not opted for Rule 96ZP(3) and had filed intimations of closures from time to time. The Tribunal noted that the original authority did not provide findings on how it concluded that the assessee was operating under Rule 96ZP(3). The Tribunal found that the appellants had not opted for Rule 96ZP, and the Revenue did not produce any evidence to contradict this. The Tribunal emphasized that Section 3A(4) allows for redetermination of duty based on actual production, which the appellants claimed was lower due to factory closures.2. Applicability of Rule 96ZP(3):The Tribunal examined Rule 96ZP(3) and its implications. It noted that Rule 96ZP(3) provides a scheme for payment of duty on a monthly basis but does not prevent an assessee from opting out of this scheme. The Tribunal referenced the Supreme Court's decision in Bhuwalka Steels Industries, which highlighted that the conditions of Rule 96ZP(3) are not eternal and that an assessee can seek redetermination of duty based on actual production under Section 3A(4). The Tribunal concluded that even if the appellants had opted for Rule 96ZP(3), they could still claim abatement for periods of non-production.3. Calculation of Duty Liability for Periods of Factory Closure:The appellants argued that their factory was closed for significant periods and that their duty liability should be calculated only for the days the factory was operational. They provided evidence of closures and argued that the duty payable was only for 58 days. The Tribunal agreed with this contention, noting that the authorities had not properly considered the appellants' claims of factory closure and abatement requests. The Tribunal found that the duty liability should be recalculated based on the actual operational days, confirming a balance duty of Rs. 1,23,990/-.4. Validity of Penalties Imposed:The appellants were initially penalized under Rule 96ZP(3) and Rule 173Q. The Tribunal found that the penalties were not justified, especially given that the appellants had not opted for Rule 96ZP(3) and were entitled to abatement under Section 3A(4). The Tribunal set aside the penalties imposed under Rule 96ZP(3), aligning with the principle that penalties should not be imposed when there is no production and hence no duty liability.Conclusion:The Tribunal concluded that the appellants were entitled to abatement of duty for the periods of factory closure under Section 3A(4) of the Central Excise Act, 1944. It found no merit in the order passed by the Commissioner (A) and set it aside. The Tribunal confirmed the balance duty of Rs. 1,23,990/- for the period of 58 days and set aside the penalties imposed under Rule 96ZP(3). The appeal was disposed of accordingly.