2008 (2) TMI 74 - AT - Central Excise

Tribunal excludes waste in capacity calculation, impacting duty payments

The Tribunal ruled in favor of the appellant in the appeal against the Commissioner of Central Excise's determination of annual production capacity. The ... Assessee contend that while determining the annual capacity waste and scrap, end cuttings, mis-rolls, etc. should not be included – as per not.49/97 wastes & scrap which arise in the course of manufacture of hot re-rolled products of non-alloy steel would not be liable to pay duty - When the items are exempted under not. 49/47, there is no justification for including them in determining annual capacity of production - appellant is required to discharge duty on pro-rata basis- appeal is allowed Issues:1. Challenge to the determination of annual production capacity by the Commissioner of Central Excise.2. Inclusion of wastes and scrap in the determination of annual capacity.3. Interpretation of Notification No.49/97 CE dated 1.8.1997.4. Defense of the impugned order by the departmental representative.Analysis:The appeal was filed against the Order-in-Original passed by the Commissioner of Central Excise, challenging the determination of annual production capacity for the year 1997-98. The impugned order was a result of a previous directive by CESTAT to re-determine the capacity due to the dismantling of a furnace before the rules came into effect. The appellant argued that wastes and scrap should not be included in the capacity calculation as per Notification No.49/97 CE dated 1.8.1997, which exempts such items from duty. The appellant relied on a previous bench decision to support this argument.The departmental representative contended that there is no provision in the rules to exclude wastes and scrap from the capacity calculation and defended the impugned order. However, after careful consideration, the Tribunal found merit in the appellant's argument. The Tribunal held that since hot re-rolled products of non-alloy steel were exempted under Notification No.49/97, including wastes and scrap in the capacity determination was unjustified. Consequently, the annual capacity was recalculated at 17313.920 M.T. by excluding the quantity of wastes and scrap produced. The appellant was directed to discharge duty on a pro-rata basis for the relevant period, and the appeal was allowed.In conclusion, the Tribunal ruled in favor of the appellant, highlighting the importance of adhering to exemption notifications in determining production capacity for excisable goods. The judgment serves as a precedent for excluding exempted items like wastes and scrap from capacity calculations, ensuring accurate duty assessments in line with relevant regulations.