Annual capacity redetermination limits Rule 5 deeming fiction when machinery changes reduce production capacity.

Rule 5 of the Hot Rolling Steel Mills Annual Capacity Determination Rules, 1997 operates as a deeming provision tied to actual production in 1996-97, but its application on redetermination under Rule 4(2) depends on the effect of a machinery change. Where the change reduces annual capacity under the Rule 3 formula, the 1996-97 production benchmark does not apply. Where capacity remains unchanged or increases after the change, Rule 5 may validly operate. The stated conclusion is that Rule 5 applies only where redetermination does not reduce annual capacity.

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Issues: Whether Rule 5 of the Hot Rolling Steel Mills Annual Capacity Determination Rules, 1997 applies when annual capacity is re-determined under Rule 4(2) on account of changes in machinery.

Analysis: The Rules provide a single formula under Rule 3 for determining annual capacity, and Rule 5 operates as a deeming provision where the capacity so computed is less than the actual production of the financial year 1996-97. Rule 4(2) permits re-determination following changes in machinery, but such redetermination still works through the Rule 3 formula. The applicability of Rule 5 depends on the effect of the machinery change: where the change reduces capacity, applying the 1996-97 production benchmark would be unjustified; where the change leaves capacity unchanged or increases it, no such hardship arises and the deeming provision may validly operate.

Conclusion: Rule 5 applies to cases where there is no reduction in annual capacity after change in machinery, including cases where capacity is unchanged or augmented, and does not apply where the change reduces annual capacity. The appeal was therefore rejected.

Ratio Decidendi: A deeming provision pegging annual capacity to actual past production may be applied on redetermination after machinery changes only when the change does not reduce the production capacity computed under the governing formula.

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