Prospective change of excise duty option under Section 3A upheld for payment based on actual production.

An assessee may change its excise duty payment option prospectively under the Section 3A and Rule 96ZO scheme, but not retrospectively for a completed period. Applying that principle, the communication dated 4-1-1999 was treated as an exercise of option to pay duty on actual production basis from that stage onward. The authorities were found to have misconstrued the communication by treating the earlier option as fixed for the relevant future period. The Tribunal was therefore said to have erred in rejecting that position and was directed to refer the formulated questions of law.

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Issues: Whether the assessee's communication dated 4-1-1999 amounted to an exercise of option to pay excise duty on actual production under Section 3A(4) of the Central Excise Act, 1944, rather than under Rule 96ZO(3) of the Central Excise Rules, 1944, and whether the Tribunal ought to be directed to refer the formulated questions of law.

Analysis: The dispute turned on the effect of the assessee's communication in the light of the governing scheme under Section 3A and Rule 96ZO. The Court relied on the principle emerging from the Supreme Court decisions that an assessee, though having once opted for a particular mode of payment, may change the option for the future period, but cannot alter it retrospectively for a period already gone by. Reading the communication along with the background orders of the Supreme Court and the High Court, the Court held that the assessee had sought to switch to payment based on actual production from that stage onward. The authorities, including the Tribunal, were found to have misconstrued the communication by treating the earlier option as unalterable for the relevant future period.

Conclusion: The communication dated 4-1-1999 was an exercise of option to pay duty under Section 3A(4) on actual production basis, the Tribunal erred in rejecting that position, and the Tribunal was directed to refer the formulated questions of law.

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