Notified goods rule under compounded levy scheme controlled capacity determination, and inconsistent duty assessment was set aside for fresh adjudication.

Under the compounded levy framework, only notified goods could be counted for annual capacity determination, so clearances of MIs-rolls under Heading 7207.90, not shown to be notified, could not be included and the capacity assessment had to be redetermined. The later duty computation was also unsustainable because it ignored the applicable Trade Notice directing use of 1997-98 production and departed from earlier Tribunal directions requiring reconsideration in de novo proceedings. Consequential duty liability based on those flawed calculations was set aside, and the matter was remanded for fresh determination of annual capacity and duty liability in favour of the assessee.

---

---

Issues: (i) Whether clearances of MIs-rolls falling under Heading 7207.90, which were not notified goods, could be included while determining annual capacity of production under the compounded levy scheme; (ii) Whether the duty determination for the later period could be sustained when it ignored the applicable Trade Notice and the Tribunal's earlier directions.

Issue (i): Whether clearances of MIs-rolls falling under Heading 7207.90, which were not notified goods, could be included while determining annual capacity of production under the compounded levy scheme.

Analysis: Section 3A of the Central Excise Act, 1944 and the relevant capacity determination rules applied only to notified goods. The rules governing hot re-rolling steel mills did not list Heading 7207.90, and no notification was shown bringing MIs-rolls under that scheme. The quantities of clearances under that heading therefore could not be taken into account for determining annual capacity of production.

Conclusion: The inclusion of clearances under Heading 7207.90 was unsustainable and the determination was liable to be set aside and redetermined in favour of the assessee.

Issue (ii): Whether the duty determination for the later period could be sustained when it ignored the applicable Trade Notice and the Tribunal's earlier directions.

Analysis: The Trade Notice directed use of 1997-98 production for the relevant later period, and the earlier Tribunal order had already indicated reconsideration of the same aspect in de novo proceedings. The determination made by continuing to rely on the 1996-97 figure and disregarding those directions could not be upheld.

Conclusion: The later duty determination was unsustainable and had to be set aside for fresh adjudication in favour of the assessee.

Final Conclusion: The capacity determination and consequential duty liabilities were not sustained and the matter was remanded for fresh re-determination of annual capacity and duty liability.

Ratio Decidendi: Under the compounded levy framework, only notified goods can be considered for annual capacity determination, and a duty determination inconsistent with binding administrative directions and prior appellate directions cannot be sustained.

---