TaxTMI 
TaxTMI 
2008 (8) TMI 285
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....is of actual production, as is provided for under Section 3 of the Act. The new system of payment of excise duty as per the compounded levy scheme came in force w.e.f. 1-9-1997. In addition to the insertion of Section 3A in the Act, corresponding amendments were carried out in the Central Excise Rules, 1944 (for short, 'the Rules') by adding Rule 96ZP which provides the procedure required to be followed by the manufacturers of hot re-rolled products for payment of excise duty under the compounded levy scheme. As under the scheme, the duty was payable on the capacity of production. Hot Re-Rolling Steel Mills Annual Capacity Determination Rules, 1997 (for short, 'the Capacity Determination Rules') were also framed. 4. As per Section 3 of the Act, the duty of excise is leviable on all excisable goods produced or manufactured in India at the rates provided for in First Schedule to the Central Excise Tariff Act, 1985. Section 3A of the Act conferred power on the Central Government to charge excise duty on the basis of capacity of production in respect of certain notified goods. As the language of the Section suggests, it started with a non obstante clause "notwithstanding anything co....
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....nation Rules. The details, as required in the Rules mentioned above, were furnished. It was further mentioned in the application that actual production of the assessee for the year 1996-97 was 15,796.150 metric tonnes. Vide order dated 16-10-1997, while considering the facts stated by the assessee in his application, the Commissioner while calculating the annual capacity of production of the unit at 7,786.153 metric tonnes on the basis of various parameters furnished by the assessee, however, determined the annual capacity of production at 15,796.150 metric tonnes, keeping in view the statement made by the assessee about its actual production being more in the previous financial year, in terms of Rule 5 of the Capacity Determination Rules. 7. Aggrieved against the order of capacity determination by the Commissioner, the assessee preferred appeal before the Customs, Excise and Gold (Control) Appellate Tribunal (now known as Customs, Excise and Service Tax Appellate Tribunal) (hereinafter referred to as 'the Tribunal'). The plea set up by the assessee along with other appellants before the Tribunal was that proper opportunity of hearing was not afforded by the commissioner while p....
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....8-9-1997) near the last (finishing) stand of the mill was found idle and not attached with the mills (finishing stand). In his statement dated 30-1-1998, Shri Surmukh Singh admitted that the mill was running with pinion stands 'A' and 'B' and pinion stand 'C' was lying separated from finishing stand and was not working. As the factors mentioned by the assessee while filing the application for determination of annual capacity production were quite different to what was found at the site and as the same could lead to substantial increase in the annual capacity of production of the assessee, a show cause-notice was issued to the assessee on 31-3-1998 for re-determination of the annual capacity of production and also demanding differential duty. On the basis of parameters avail able at the site, it was found that the annual production capacity of the assessee was required to be determined at 22,033.499 metric tonnes, as compared to the capacity determined initially at 7,786.153 metric tonnes on the basis of the parameters declared by the assessee, whereas the actual production during the immediate preceding financial year 1996-97 was 15,796.150 metric tonnes. 11. The show cause noti....
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....nged non-production or change in the installed capacity. The adjudication proceedings do not concern either type of case. It is also clear from a perusal of the Circular No. 331 /47/97-CX dated 30-8-1997, that the 'd' factor relevant for determining the capacity of production is "the pinion center distance of the pinion stand connecting the last rolling mill drive of the finishing mill excluding any, pinch roll". It is not in dispute that according to the lay out of the appellants mill, pinion stand 'C' was the last. It was so at the time of filing of application for compounding, it remained so during the visit the Central Excise Officers and the passing of the impugned order. Therefore, the original determination carried out by the Commissioner was done according to the rules for determination of annual capacity and the instructions of the Government on the subject. There was no justification for deviating from the annual capacity so determined. The impugned order was wholly misdirected in setting out to re-determine the annual capacity and in demanding Central Excise duty merely because pinion stand 'C' was not functional for a short period." 13. A perusal of the order passed ....
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..... It is in this factual matrix that the issue is before this Court for consideration in the writ petition filed by the assessee. 16. The Revenue is also aggrieved against the order passed by the Tribunal and in C.E.C. No. 3 of 2006 is seeking a direction for reference of the following question of law to this Court for opinion arising out of the order passed by the Tribunal on 6-9-2002: "In the event of change in any of the parameters of Hot re-rolling Mills as prescribed in sub-rule (2) of Rule 4 of the Hot re-rolling Steel Mills Annual Capacity Determination Rules, 1997 (hereinafter referred to as HRSMACD Rules), the annual capacity will still not be determined in terms of Formulae as prescribed in the sub-rule (3) of Rule 3 of the HRSMACD Rules?" 17. Learned counsel for the assessee submitted that after setting aside of order dated 22-12-2000 by the Tribunal vide order dated 6-9-2002, the annual capacity of production determined by the Commissioner at 22,033.499 metric tonnes, was set aside and the original determination of capacity by the Commissioner was restored. He further submitted that the original capacity should be taken at 7,786.153 metric tonnes as even the cap....
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....d before this Court and various other High Courts. The matter went up to Hon'ble the Supreme Court, where the same was upheld vide judgments reported as Commissioner of C. Ex. & Customs v. Venus Castings (P) Ltd., 2000 (117) E.L.T. 273 and Sathavahana Steels & Alloys (P) Ltd. v. Government of India, 1999 (114) E.L.T. 787. The same view was expressed by this Court in C.W.P. No. 11718 of 2005 - M/s. Punjab Bearing Industries Ltd. v. Union India and others, decided on 8-5-2006 [2006 (203) E.L.T. 187 (P&H)]. 21. The undisputed facts on record are that the assessee is a unit engaged in the manufacture of re-rolling products. After the introduction of the compounded levy scheme, he filed application for determination of annual capacity of production on 8-9-1997 providing particulars about certain factors relevant for determination of the annual capacity in terms of the Capacity Determination Rules. It was further mentioned in the application that actual production of the assessee for the year 1996-97 was 15,796.150 metric tonnes. Vide order dated 16-10-1997, while considering the facts stated by the assessee in his application, the Commissioner while calculating the annual capacity of....
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....termination was being referred to by the Tribunal. Even on an application by the assessee, the issue was not clarified, rather was made more complex. 24. As per the Capacity Determination Rules, there are two methods vide which the annual capacity of production can be determined, namely, by applying the formula after taking into consideration various factors provided for in the Capacity Determination Rules which had direct relations with the machinery installed in the factory and in case it was found that actual production of the unit during the immediately preceding year 1996-97 was more than the capacity of production arrived by application of the formula, then higher of the two figures was to be determined as annual capacity of production. Sub-rule (5) of the Capacity Determination Rules, which is relevant for the purpose, is extracted below: "(5) In case, the annual capacity determined by the formula in sub-rule (3) of rule 3 in respect of a mill, is less than the actual production of the mill during the financial year 1996-97, then the annual capacity so determined shall be deemed to be equal to the actual production of the mill during the financial year 1096-97." 25.....