Proportionate duty assessment for part-year factory closure entitled the assessee to abatement under excise capacity rules.

Where a factory producing notified goods operated only for part of the year, the proviso to Section 3A(2) required duty to be worked out on a proportionate basis for the actual period of operation. The Tribunal noted that the annual capacity rules also contemplated pro rata computation for a part-year operation or change in capacity, and found no basis for limiting the effect of closure to the succeeding year. The assessee was therefore entitled to abatement for the closure period, and the duty demand sustained by the Commissioner (Appeals) could not stand.

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Issues: Whether the assessee was entitled to abatement from payment of duty for the period during which the factory remained closed under the proviso to Section 3A(2) of the Central Excise Act, 1944.

Analysis: The proviso to Section 3A(2) provides that where a factory producing notified goods is in operation only during a part of the year, production is to be calculated on a proportionate basis of the annual capacity of production. The annual capacity under the Hot Re-Rolling Steel Mills Annual Capacity Determination Rules, 1997 is determined under Rule 3, and Rule 4(1) also contemplates pro rata calculation for any part of the year or change in capacity. The Tribunal found no rule or provision supporting the view that closure in one year affects determination of capacity only for the succeeding year. The reliance placed on the decision concerning Rule 96ZO(3) and Section 3A(4) was found inapposite because that decision did not deal with the proviso to Section 3A(2).

Conclusion: The assessee was entitled to the benefit of abatement from duty for the closure period, and the demand upheld by the Commissioner (Appeals) could not stand.

Ratio Decidendi: Where a factory covered by Section 3A(2) is operative only for part of the year, duty is chargeable on a proportionate basis for the actual period of operation, and closure during the year entitles the assessee to abatement for that period.

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