2005 (9) TMI 210 - AT - Central Excise

Tribunal favors appellant in capacity determination dispute under Steel Mills Rules.

BSKS. IRON & STEEL ROLLING MILLS Versus CCE., CHANDIGARH

The Tribunal ruled in favor of the appellant in a case concerning the determination of annual production capacity under the Hot Rerolling Steel Mills ... Production capacity based duty Issues:Capacity determination under Rule 4 of Hot Rerolling Steel Mills Annual Capacity Determination Rules, 1997; Interpretation of annual capacity determination rules; Application of Rule 5 for deeming provision of annual capacity based on previous year's production; Comparison of production capacity for multiple mills in the same premises.Analysis:The appeal challenged the order of the Commissioner of Central Excise, Chandigarh, determining the annual production capacity of the appellant as 10594.508 m.t. under Rule 4 of the Hot Rerolling Steel Mills Annual Capacity Determination Rules, 1997. The appellant, a manufacturer of steel products through hot-rolling process, was liable to pay duty at compounded rates as per Section 3A of the Central Excise Act, 1944.The appellant opted for payment under the compounded levy scheme, specifying that only one of the two rolling mills in the premises was operational at a time. The Commissioner determined the capacity considering the mill with higher parameters, resulting in an annual capacity of 5439.250 m.t. The appellant was directed to pay duty based on the capacity of 10594.508 m.t. per annum under Rule 5 of the mentioned rules, which deems the annual capacity to be equal to the actual production of the mill during the financial year 1996-97.The appellant contended that annual capacity should be determined for a 'mill' and not for a factory, emphasizing that the capacity of the higher production mill should be the basis. The appellant argued that the production of the higher capacity mill should have been considered for Rule 5 instead of the combined production of both mills, as the production of the higher capacity mill was 6201.79 m.t. The appellant also referred to a clarification by the Central Board of Excise & Customs supporting this position.The Tribunal noted that the rules specify capacity determination for a 'rolling mill' and not for a 'factory'. Considering the appellant's letter stating that only one rolling mill was in production, the capacity was correctly determined based on the higher capacity mill. The Tribunal rejected the Revenue's argument that both mills were operative, as verification indicated only one furnace was working. The comparison under Rule 5 was required with the actual production of the previous year for the higher capacity mill, leading to the acceptance of the appeal and ordering the annual capacity to be 6201.79 m.t. instead of 10594.508 m.t. as determined by the Commissioner.