AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2011 (3) TMI 1704
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.... the Central Excise Act, 1944 (the Act). 2. The petitioner No.1, a private limited company, is engaged in the business of manufacture of MS Ingots falling under Heading No.72.06 of the First Schedule to the Central Excise Tariff Act, 1985. Goods like ingots and billets are manufactured by employing a plant called 'Induction Furnace'. The petitioner company also has an induction furnace for manufacture of MS Ingots in its factory. The aforesaid goods being excisable goods, the petitioners were paying excise duty at the appropriate leviable rates. However, the Central Government notified the said goods under the Compounded Levy Scheme with effect from 1st August, 1997 hence, excise duty was leviable and recoverable on the basis of production capacity of the petitioners' factory with effect from 1st August, 1997. The Central Government issued various notifications providing for the procedure to be followed by the manufacturers of ingots and billets (rule 96ZO) and also providing for the method for determination of annual capacity of such manufacturers by framing rules known as the Induction Furnace Annual Capacity Determination Rules, 1997 ("Determination Rules"). Under t....
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....was 3390 Kgs (3.39 M.T.) this was the capacity for feeding the material, whereas the actual production of the final product would be 3000 Kgs (3 M.T.) as the remaining material would be lost as a result of burning loss and other wastage such as runners and risers. It was, therefore, the case of the petitioner company that as its furnace capacity was 3 M.T., the petitioner company was obliged to pay excise duty of ₹ 5 lakhs per month in accordance with the rate of ₹ 5 lakhs per month in respect of a furnace capacity of 3 M.T. prescribed under rule 96ZO(3) of the Rules. 5. The second respondent, however, determined the furnace capacity at 3.39 M.T. and fixed the duty liability at ₹ 5,65,000/- per month in respect of the petitioners' factory which came to be communicated to the petitioners vide letter dated 26th March, 1998. Upon receiving the above referred determination, the petitioners took out certain proceedings by way of appeal before the Tribunal as well as representation before second respondent in his administrative capacity. The Tribunal considered the petitioners' appeal and directed the second respondent to consider and decide the petitioners'....
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....o calculate the annual capacity of production in terms of the formula given in rule 2 sub-rule (3) of the Determination Rules and should have determined the annual capacity by multiplying the figure of 3.39 with 3200 as prescribed under the said rules. Thus, the annual production capacity should have been fixed at 10848 MTs on the basis of the invoice of the manufacturer of the furnace. Accordingly appeal came to be preferred before the Tribunal, who, vide the impugned order dated 4th March, 2002 set aside the order passed by the Commissioner and held that the annual production capacity based upon the actual capacity of furnace would be very many times the figure of 3000 kgs and the Commissioner was required to apply the prescribed formula to the said capacity. The Tribunal accordingly held that the Commissioner's order was clearly erroneous and could not be sustained and accordingly set aside the same and remanded the case to the Commissioner to determine the correct annual capacity in accordance with law. Being aggrieved, the petitioners have preferred the present petition seeking the relief noted hereinabove. 7. Mr. Paresh Dave, learned advocate appearing on behalf of the petit....
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.... Tribunal has directed the petitioners to apply the prescribed formula to the total furnace capacity determined in the case of the petitioners. It was submitted that the Tribunal has lost sight of the fact that the prescribed formula has to be applied where the annual production capacity of the factory is required to be determined under subrule (I) of rule 96ZO and not in a case where the total furnace capacity is determined under sub-rule (3) of rule 96ZO of the rules. It was submitted that in the circumstances, the impugned order of the Tribunal being contrary to the provisions of rule 96ZO of the rules, is required to be quashed and set aside and the order passed by the Commissioner is required to be confirmed with consequential relief to the petitioners. 9. On the other hand, Ms. Nayna Gadhvi, learned standing counsel for the respondents, opposed the petition and placed reliance upon the averments made in the affidavit-inreply filed on behalf of the respondents. It was submitted that the petitioners had claimed the actual production to be 3 M.T. as there would be burning loss. However, the claim raised by the petitioners was not correct as the furnace supplier's invoice al....
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....missioner determined the production capacity of the said furnace at 3000 kgs for the period 1997-98 and from 1st April, 1998 to 12th April, 1998. In revenue's appeal against the said order of the Commissioner, the Tribunal has held that the capacity as determined by the Commissioner was in fact the capacity of each of the furnaces in question to produce ingots any one time, that is, one time charge as technical expression goes, and that the annual production capacity based upon this would be very many times this number. According to the Tribunal, the Commissioner was in fact required to apply the prescribed formula to this capacity. It, therefore, allowed the appeal and remanded the matter to the Commissioner for determining correctly the annual capacity of each furnace in accordance with law. 11. Since the dispute involved in the present case pertains to the determination of the production capacity of the induction furnace of the petitioners, it may be germane to refer to the relevant rules in this regard. Rule 96ZO of the rules provides for the "Procedure to be followed by a manufacturer of Ingots and Billets". Sub-rule (1) thereof provides that a manufacturer of non-alloy steel....
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.... sub-section (4) of section 3A of the Central Excise Act, 1944. The second proviso to sub-rule (3) of rule 96ZO of the rules lays down that if the capacity of the furnaces installed in a factory is more than or less than 3 metric tones, or there is any change in the total capacity, the manufacturer shall pay the amount, calculated pro-rata. Sub-rule (4) of rule 96ZO provides that in case the manufacturer wishes to avail of discharging duty liability in terms of sub-rule (3), he shall inform the Commissioner of Central Excise, with a copy to the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise, in the proforma prescribed thereunder. 12. Thus, rule 96ZO of the Rules prescribes two modes of determination of the duty liability in respect of manufacturers of non-alloy steel ingots and billets falling under sub-heading Nos.7206.90 and 7207.90 of the Scheme to the Central Excise Tariff Act, 1985. The first mode of determination of duty liability is under sub-rule (1) thereof, which provides for calculation of the duty at the rate of ₹ 750/- per metric tonne on the annual capacity of production of the factory. The second mode of determination of duty....
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....y liability in terms of sub-rule (3) of rule 96ZO of the Rules, the Commissioner was required to determine the total capacity of the furnaces installed in the factory of the petitioners and based upon such determination, if the capacity was determined at 3 MTs the petitioner would be liable to pay rupees five lakhs per month in equal instalments as provided under the said sub-rule and in case the capacity was determined to be less than or more than 3 metric tonnes, the petitioner would be liable to pay an amount calculated pro rata. However, under no circumstances, could the duty liability be determined by applying the formula under the Determination Rules which applies only in case where duty liability has to be determined under sub-rule (1) of rule 96ZO of the Rules. In the circumstances, the impugned order of the Tribunal holding that the Commissioner was required to apply the prescribed formula to the furnace capacity of 3000 kgs determined by him, being contrary to basic scheme of rule 96ZO of the Rules and more particularly to the provisions of rule 96ZO(3) of the rules, cannot be sustained and as such, is required to be quashed and set aside. 14. Consequent upon setting asi....