Annual capacity for hot air stenters excludes a gallery without heat-setting or drying utility, invalidating the capacity computation.

For annual capacity determination under the special excise scheme for hot air stenters, only components with functional heat-setting or drying utility can be included. A gallery attached to the chamber, having no independent such utility, is excluded from the stenter for capacity computation. Applying the Supreme Court ruling on the identical question, the impugned capacity fixation based on inclusion of the gallery was unsustainable, and the resulting demand and penalty could not stand.

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Issues: Whether the length of the gallery attached to a hot air stenter is to be included while determining annual capacity of production under Section 3A of the Central Excise Act, 1944.

Analysis: The dispute concerned computation of annual capacity for duty purposes under the special procedure for hot air stenters. The Court applied the Supreme Court's ruling on the identical question and accepted that a gallery attached to the chamber, having no independent heat-setting or drying utility, is not to be treated as part of the stenter for capacity determination. On that basis, the capacity fixation adopted in the impugned order was found unsustainable.

Conclusion: The issue was decided in favour of the assessee and against inclusion of the gallery for determining annual capacity of production.

Final Conclusion: The demand and penalty sustained on the challenged computation could not stand, and the appeal succeeded with consequential relief.

Ratio Decidendi: For determining annual capacity of production under the special excise scheme, only the parts of the stenter that have the requisite functional utility for heat-setting or drying can be included; a gallery without such utility is excluded.

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