Actual production under compounded levy must be determined on evidence, not by reverting to annual capacity rules alone.

Section 3A(4) of the Central Excise Act requires the Commissioner, on an assessee's claim, to determine actual production after giving an opportunity to produce evidence. RG-1 and RT-12 returns are not conclusive of actual production, but the Commissioner cannot reject the claim merely by reverting to annual capacity determination under section 3A(2) or by disregarding the assessee's material without proper enquiry. Where the existing material is insufficient, further records or evidence may be called for to reach a reasoned finding. The matter was remanded for fresh adjudication and actual production had to be re-determined on the evidence adduced by both sides.

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Issues: Whether, in proceedings under section 3A(4) of the Central Excise Act, 1944, the Commissioner was bound to determine actual production on the basis of the assessee's evidence and could reject the claim merely by reverting to annual capacity determination or by refusing to act on RG-1 and RT-12 returns.

Analysis: Section 3A creates a special compounded levy mechanism under which annual production capacity is first determined under sub-section (2), but sub-section (4) separately empowers the Commissioner, on the assessee's claim, to determine actual production after giving an opportunity to produce evidence. The decision accepts that RG-1 and RT-12 returns are not conclusive of actual production, yet the Commissioner cannot ignore the assessee's material and simply reapply the annual capacity rules. If he is not satisfied with the returns, he must make a proper enquiry and may call for further records or evidence to arrive at actual production. The impugned orders were found to lack sufficient reasoning for disregarding the material placed by the assessees.

Conclusion: The Commissioner was required to re-determine actual production on the basis of evidence adduced by both sides, and the matter had to be remanded for fresh adjudication. The appeals were therefore allowed by way of remand.

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