Excise duty demand cannot rest on a set-aside production capacity determination until fresh redetermination is completed.

Excise duty under Section 3A of the Central Excise Act depends on the valid determination of production capacity for notified goods. Where an earlier capacity determination had been set aside in appeal and a fresh determination was directed after hearing, duty could not continue to be demanded on the basis of the superseded order. The authority was required to redetermine actual production capacity in compliance with the appellate remand, and recovery on the earlier determination remained impermissible until a valid redetermination was made.

---

---

Issues: Whether excise duty could be demanded on the basis of an earlier determination of annual production capacity that had been set aside by the appellate authority, and whether the authority was required to redetermine the production capacity in compliance with the appellate order.

Analysis: The statutory scheme under Section 3A of the Central Excise Act permits levy of duty on the basis of the capacity of production of notified goods. The earlier determination made by the Commissioner had already been set aside by the appellate authority, which had directed a fresh determination after granting opportunity of hearing. In these circumstances, the subsisting basis for demanding duty on the strength of the set-aside determination could not survive. The matter was also shown to be pending before the Commissioner despite the appellate remand.

Conclusion: The authority was directed to redetermine the actual production capacity within the time granted, and the respondents were restrained from demanding excise duty on the basis of any earlier determination until such redetermination was made.

Ratio Decidendi: When an assessment or determination of production capacity is set aside in appeal and fresh determination is ordered, recovery cannot continue on the basis of the superseded determination until a valid redetermination is made.

---