Installed capacity for exemption cannot be fixed from actual production; equipment capacity and certification control the threshold.

Installed capacity for exemption under Notification No. 128/77 had to be determined by the capacity of the equipment installed in the paper mill, as ordinarily reflected by competent governmental recognition or certification, not by actual production or maximum monthly output. The Tribunal held that installed capacity could not be equated with working capacity and that actual production may be higher or lower than installed capacity, so sustained production figures were an unsafe basis for fixing the threshold. On that basis, the finding that the unit exceeded 2000 MT per annum was not sustainable and the Revenue's appeal failed.

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Issues: Whether the annual installed capacity of a paper mill for exemption under Notification No. 128/77 dated 18-6-1977 could be determined by reference to actual production or maximum monthly production, instead of the installed or designed capacity recorded by the competent authority.

Analysis: The exemption depended on the annual installed capacity of the mill, but the notification did not define that expression or prescribe that actual production should be treated as the measure of installed capacity. The Tribunal noted the departmental clarification that installed capacity means the capacity of the equipment installed in the mill, normally reflected by governmental recognition or DGTD certification, and that actual production may be lower or higher than installed capacity. It also accepted the earlier view that installed capacity cannot be equated with working capacity, and that sustained or monthly actual production is not a safe basis for fixing installed capacity.

Conclusion: The installed capacity could not be determined from actual production figures, and the finding that the unit exceeded 2000 MT per annum on that basis was not sustainable. The Revenue's appeal failed.

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