Annual capacity under section 3A excludes a stenter gallery that does not itself aid heat setting or drying.

For computation of annual capacity of production under section 3A, only attached equipment that actually aids the process of heat setting or drying can be treated as part of the stenter chamber. A gallery that has no rails, fan or radiator and does not itself perform that function cannot be added merely because it may reduce heat loss. Applying the larger Bench view, the length of the gallery was excluded from the stenter chamber for excise capacity determination, and the demand basis adopted by the authorities could not be sustained, entitling the assessee to relief in accordance with law.

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Issues: Whether the length of the gallery attached to a hot air stenter is required to be added to the length of the stenter chamber for determining annual capacity of production and levy of central excise duty.

Analysis: The applicable rule for fixation of annual capacity of production under section 3A treated the stenter chamber as the relevant unit, and any attached equipment could be counted only if it functioned as equipment aiding the process of heat setting or drying. A gallery with no rails, fan or radiator attached to it does not itself answer that description merely because it may reduce heat loss. The binding larger bench view accepted that such a gallery is not within the expression of equipment contemplated by the explanation and that only equipment actually aiding the process can be included.

Conclusion: The length of the gallery is not to be added to the length of the stenter chamber; the issue is decided in favour of the assessee.

Final Conclusion: The demand basis adopted by the authorities below could not be sustained, and the assessee was entitled to relief in accordance with law.

Ratio Decidendi: For computation of annual capacity under section 3A, only attached equipment that actually aids the process of heat setting or drying can be treated as part of the stenter chamber; a gallery that does not itself perform that function cannot be added.

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