Re-determination of annual capacity after lawful parameter change excludes reliance on earlier fixed capacity under Rule 5.

Where a hot re-rolling mill lawfully changes its parameters after annual capacity fixation, capacity must be re-determined under the Rule 3(3) formula on the revised parameters. If that recalculation yields a lower capacity, the Revenue cannot insist on duty based on the earlier, no-longer-existent fixed capacity. Rule 5 is inapplicable to restore the 1996-97 capacity when the unit's authorised changes have reduced actual capacity. The Tribunal's view favouring the assessee was left undisturbed.

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Issues: Whether, on a change in the parameters of a hot re-rolling mill, the annual capacity had to be re-determined under the formula under Rule 3(3) of the Hot Re-rolling Steel Mills Annual Capacity Determination Rules, 1997, and whether Rule 5 could be invoked to restore the earlier capacity fixed for 1996-97.

Analysis: The capacity originally fixed for 1996-97 was based on the parameters then in force. After the parameters were changed with permission, the capacity fell substantially on application of the formula under Rule 3(3). In that situation, the Revenue could not insist on duty based on a capacity that no longer existed. Rule 5 was held to be inapplicable where, after fixation, the unit lawfully altered its parameters and the actual production capacity came down. The Court also noted that the Tribunal had taken a similar view in an earlier case and found no reason to differ.

Conclusion: Rule 5 could not be invoked on the facts, and no question of law arose from the Tribunal's order.

Final Conclusion: The reference petition failed and the Tribunal's view in favour of the assessee was left undisturbed.

Ratio Decidendi: Where a unit lawfully changes its parameters after capacity fixation and the capacity is re-determined lower under the prescribed formula, the earlier fixed capacity cannot be treated as continuing for the purpose of Rule 5.

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