2022 (1) TMI 905 - AT - Central Excise

Tribunal sets aside duty demand, rules in favor of appellant under Central Excise Rules.

Techno Prints India Pvt Ltd Versus Commissioner of Central Excise Thane – II

The Tribunal set aside the confirmed duty demand under Rule 96ZQ of Central Excise Rules, 1944, citing the rule as ultra vires. The appellant's failure to ... Determination of annual production capacity - redetermination of capacity by not taking the rail galleries and taking the length of the chamber as 6231 - HELD THAT:- In the impugned order, the only reason for confirmation of demand is that the appellant has not challenged the order of determination of annual production capacity. The said issue has attained finality as held by the Hon’ble High Court of Gujarat in the case of PREMRAJ DYEING & PRINTING MILLS PVT. LTD. VERSUS UNION OF INDIA [2013 (6) TMI 118 - GUJARAT HIGH COURT] and of the Hon’ble High Court of Bombay in OM TEXTILE PVT. LTD. VERSUS COMMR. OF C. EX., BELAPUR, NAVI MUMBAI [2006 (3) TMI 726 - BOMBAY HIGH COURT] that there is no requirement to challenge the order of determination of annual production capacity and the assessee is at liberty to challenge the demand of duty as demanded in the show cause notice on the basis of such determination of annual production capacity. Matter remanded back to the adjudicating authority to redetermine the annual production capacity taking the length of chamber as 6231 and not to add the length of rail galleries - appeal allowed by way of remand. Issues:Appeal against confirmed duty demand under Rule 96ZQ of Central Excise Rules, 1944 read with HASITPACD Rules, 1998.Detailed Analysis:Issue 1: Duty Demand ConfirmationThe appellant appealed against the confirmed duty demand under Rule 96ZQ of Central Excise Rules, 1944 read with HASITPACD Rules, 1998. The appellant, a processor of textile fabrics, discharged duty on processed textile fabrics as per Notification No. 41/1998-CE N.T. dated 10th December 1998. The duty was calculated based on the annual capacity determined on 29th June 1999, resulting in a demand of &8377; 34,84,500/-. Subsequently, a show cause notice was issued for demanding differential duty, leading to the final demand of &8377; 11,86,006/- in an order dated 29th December 2011. Interest and penalty equivalent to duty were also imposed.Issue 2: Legal ArgumentsThe appellant's representative argued that Rule 96ZQ was declared ultra vires by the apex court, thus contending that interest and penalty were not imposable under the said rule. Additionally, discrepancies in the calculation of duty were highlighted, emphasizing the exclusion of the length of rail galleries while determining the number of chambers. The appellant cited relevant legal precedents, such as the case of Shree Bhagwati Steel Rolling Mills and others, to support their arguments regarding the exclusion of rail gallery length.Issue 3: Tribunal's DecisionThe Tribunal noted that the appellant's failure to challenge the order of determination of annual production capacity was the sole reason for the demand confirmation in the impugned order. However, legal precedents, including judgments from the High Courts of Gujarat and Bombay, established that challenging the annual production capacity determination was not a prerequisite to contesting duty demands based on such determination. Moreover, in line with the apex court's ruling on the ultra vires nature of Rule 96ZQ, the Tribunal set aside the impugned order. The matter was remanded to the adjudicating authority to redetermine the annual production capacity, excluding the length of rail galleries, and to recalculate the abatement amount accordingly. The demand for interest and penalty was also set aside based on the apex court's decision.ConclusionThe appeal was disposed of by way of remand, with the Tribunal directing the adjudicating authority to reevaluate the annual production capacity and issue a proper order in compliance with the law, as per the observations made. The decision highlighted the importance of legal principles and precedents in determining duty demands and related penalties.