2005 (4) TMI 60 - SC - Central Excise

Court affirms Commissioner's decision on annual capacity of production for excise duty.

CHANNY ENTERPRISES Versus COMMISSIONER OF C. EX., CHANDIGARH

The court upheld the Commissioner's decision on the determination of annual capacity of production (ACP) for excise duty on hot rolled steel products. The ... How would the annual capacity of production be determined if a unit has more than one rolling mill in the same premises but operates only one rolling mill at a time? Held that:- Circular No. 326 also dated 25-7-1997 dealt with the capacity of production of hot re-rolling mills. There is no paragraph in this circular similar to the quoted paragraph relating to the ACP of induction furnaces. Paragraph 18 of Circular No. 326 says that the paragraphs in the circular explain the salient features of Section 3A scheme as applicable to re-rolling mills. It also says that the scheme, in general terms, is on the same lines as that for the Induction Furnace units and that therefore the explanation on some of the common features are the same as those contained in Circular No. 325. This does not tantamount to saying that all the features of the induction furnace scheme were to be incorporated into the hot rolling mill scheme. The appellant's contention that the second mill was set up after the approval of the Commissioner is of no consequence. The approval granted by the Commissioner did not in any way affect the assessment required to be made in accordance with the Rules. Thus the appeal is dismissed Issues:- Determination of annual capacity of production for levy of excise duty on hot rolled steel products.- Interpretation of Circular dated 26th February, 1998 in relation to operating multiple rolling mills with one or more reheating furnaces.- Application of Rule 3 for calculation of annual capacity of production based on the motor's revolutions per minute.- Consideration of expert opinion in determining technical issues related to the operation of multiple mills with a common motor.- Evaluation of Commissioner's approval for setting up a second furnace within the assessed annual capacity.Analysis:- The case involved the determination of annual capacity of production (ACP) for the levy of excise duty on hot rolled steel products. The Government of India had notified ingots and billets under Section 3A of the Central Excise Act, 1944, and rules were framed for ACP determination known as the Induction Furnace Annual Capacity Determination Rules, 1977.- The Circular dated 26th February, 1998 clarified that if a unit has one reheating furnace with two rolling mills, the capacity of the higher mill should be considered for ACP assessment. However, if each rolling mill has a reheating furnace, the total capacity of all mills should be taken into account.- The appellant installed a second furnace after having one heating furnace, leading to a dispute on ACP determination. The appellant argued that as there was only one common motor for both furnaces, the higher mill's capacity should be considered. The appellant also submitted an expert certificate stating that the mills could not be run simultaneously with the same motor.- The Commissioner rejected the expert opinion due to timing and determined the ACP based on the circular and admitted facts. The courts upheld the Commissioner's decision, emphasizing that the scheme operated based on mill capacity, not actual production.- The appellant's reliance on a Kolkata CEGAT decision was dismissed as separate schemes existed for induction furnaces and re-rolling mills. The approval for the second furnace by the Commissioner did not impact the assessment criteria under the rules.- Ultimately, the appeal was dismissed without costs, affirming the Commissioner's decision on ACP determination based on the circular and relevant rules.This detailed analysis covers the issues related to ACP determination, interpretation of the circular, application of technical criteria, consideration of expert opinion, and evaluation of Commissioner's approval within the legal context of the judgment.