Annual capacity-based excise duty under Section 3A prevails where production has just commenced and actual output is not yet ascertainable.

Section 3A levy on notified excisable goods is based on annual capacity of production determined under the prescribed rules, and actual production is relevant only where a lower actual figure can be established against that determined capacity. Where manufacture has only recently commenced, no existing actual production figure is available for substitution, and capacity cannot be fixed on a projected basis. The prescribed capacity-determination rules therefore continue to govern, and an assessee cannot insist on duty liability being computed on actual production from the outset.

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Issues: Whether an assessee who had only recently commenced manufacture of notified goods could insist on determination of duty liability on the basis of actual production from the very beginning under Section 3A of the Central Excise Act.

Analysis: Section 3A provides for levy of duty on notified goods on the basis of annual capacity of production determined under the prescribed rules, and actual production becomes relevant only where the assessee establishes that its actual production is lower than the capacity determined under those rules. The scheme contemplates an existing and ascertainable actual production figure. Where manufacture has only just commenced, actual production is not yet available, and the capacity cannot be fixed on a projected or envisaged basis. The prescribed rules for capacity determination therefore continued to govern the case, and the plea for immediate adoption of actual production basis was unavailable.

Conclusion: The claim to discharge duty liability on the basis of actual production from the outset was rejected.

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