Actual production under the excise capacity scheme can justify redetermination of duty liability where output falls below fixed capacity.

Under the special duty scheme for notified steel goods, annual capacity is first fixed and duty is ordinarily levied by reference to that capacity, but Section 3A(4) allows an assessee to show that actual production was lower and requires the Commissioner to determine actual production on supporting evidence. The statutory adjustment mechanism in Section 3A(5) confirms that duty may be re-determined where production is below the assessed capacity. The Tribunal therefore held that duty liability could not be confined to the fixed capacity alone and remanded the matter for fresh determination on actual production.

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Issues: Whether the assessee, whose actual production was stated to be lower than the annual capacity fixed by the Commissioner, was entitled to re-determination of duty liability on the basis of actual production under Section 3A of the Central Excise Act, 1944.

Analysis: The dispute turned on the operation of the special scheme for notified steel goods, under which annual capacity is first determined and then duty is levied with reference to that capacity. The Tribunal held that Section 3A(4) permits an assessee to claim that actual production is lower than the capacity determined under Section 3A(2), and obliges the Commissioner to determine actual production after considering supporting evidence. It further noted that Section 3A(5) provides for adjustment of duty already paid against the duty as re-determined, which shows that the statutory scheme contemplates levy on actual production where it is below the fixed capacity.

Conclusion: The assessee was entitled to have duty liability re-determined on the basis of actual production, and the impugned order confirming duty on the fixed capacity was set aside with remand for fresh determination.

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