Installed capacity governs excise assessment for hot re-rolling mills; separate furnaces require clubbing both mills' capacity.

The special capacity-based excise scheme under Section 3A of the Central Excise Act, 1944 assessed hot re-rolling mills on installed capacity, not actual production. Where each rolling mill had its own re-heating furnace, the annual capacity was to be computed by aggregating the capacity of both mills, even if only one mill could be operated at a time. The circular applied only where two rolling mills shared one re-heating furnace, in which case the higher capacity could be adopted. The approved installation of a second furnace did not change the assessment basis, so the capacity determination by clubbing both mills was upheld.

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Issues: Whether, for levy of excise duty under the special capacity-based scheme for hot re-rolling mills, the annual capacity of production had to be determined by taking the capacity of both mills together when each rolling mill had a separate re-heating furnace, even if only one mill could be operated at a time.

Analysis: The scheme under Section 3A of the Central Excise Act, 1944 proceeded on installed capacity and not on actual production. The relevant circular clarified that the higher capacity of one of two mills could be adopted only where a unit had one re-heating furnace with two rolling mills. Where each rolling mill had its own re-heating furnace, the capacity of the unit was to be taken as the sum total of the capacity of each mill, irrespective of whether both mills were run simultaneously. The assessment was therefore to be made on the basis of the admitted configuration and the language of the circular, and the approval for installation of the second furnace did not alter the statutory assessment.

Conclusion: The annual capacity of production was correctly determined by clubbing the capacity of both mills, and the challenge to the assessment failed.

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