Installed capacity for excise exemption must be proved from licence and technical records, not speculative production assumptions.

A rule-based show cause notice was treated as valid notwithstanding the omission of Rule 10, because Section 11A continued the liability regime in substantially similar terms. For exemption under Notification No. 128/77, installed capacity had to be ascertained from the industrial licence, import permission and DGTD correspondence, not from actual output or conjectural assumptions about optimum operation. On those materials, the paper mill's installed capacity exceeded 5,000 MT, so the concessional duty claim failed. The demand was therefore maintainable, subject to recomputation of differential duty on the basis of the higher capacity determined on record.

---

---

Issues: (i) Whether the show cause notice issued under Rule 10 could validly sustain proceedings after the introduction of Section 11A; (ii) whether the appellants were entitled to concessional duty under Notification No. 128/77 on the basis that the annual installed capacity of the paper mill did not exceed 5,000 MT.

Issue (i): Whether the show cause notice issued under Rule 10 could validly sustain proceedings after the introduction of Section 11A.

Analysis: Rule 10 was omitted with effect from 17-11-1980, but Section 11A came into force simultaneously in substantially similar terms. A rule framed under the Act forms part of the statute and is to be construed as such. On that footing, the notice was not rendered invalid merely because the provision under which it was issued stood omitted, since the liability provision continued in the statute in another form.

Conclusion: The show cause notice was valid and the proceedings could continue.

Issue (ii): Whether the appellants were entitled to concessional duty under Notification No. 128/77 on the basis that the annual installed capacity of the paper mill did not exceed 5,000 MT.

Analysis: The installed capacity had to be determined from the industrial licence, the permission for import of machinery, and the DGTD correspondence, rather than from actual production figures or speculative assumptions about hours and days of operation. The record showed an initial licence indicating 6,000 MT, later substituted by 9,000 MT, and the DGTD letter also indicated a daily capacity of 25 to 30 MT. The departmental computation based on optimum utilisation and assumed working conditions was not accepted, as installed capacity could not be fixed on conjectures. On the materials relied upon, the mill's installed capacity exceeded 5,000 MT during the relevant period.

Conclusion: The appellants were not entitled to the concession under Notification No. 128/77.

Final Conclusion: The demand was held maintainable and the matter was confined to recomputation of the differential duty on the basis of the higher installed capacity determined by the Tribunal.

Ratio Decidendi: Installed capacity for exemption purposes is to be ascertained from the industrial licence and authoritative technical correspondence, and not from actual production or speculative estimates of optimum utilisation.

---