TaxTMI 
TaxTMI 
2000 (12) TMI 116
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.... capacity of production, or such factors relevant to the annual capacity of production of the factory in terms of sub-section (2) of Section 3A of the Central Excise Act. Further, Hot Rolling Steel Mills Annual Capacity Determination Rules, 1997 issued under sub-section (2) of Section 3A of Central Excise Act laid down, how the annual capacity of hot re-rolling mills is to be determined. Rule 3 of these rules stipulates that annual capacity shall be determined in the manner laid down therein. The formula for determination of the annual capacity as stated under sub-rule (3) of Rule 3 is as under :- "Annual Capacity = 1.885 x 10-4 x d x n x i x e x w x Number of utilised hours (in metric tonnes)" Rule 4 of the same Rule relates to calcu....
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....e actual production of the mill during 1996-97 the Commissioner ordered that annual capacity shall be deemed to be equal to the production of the mill during the financial year 1996-97, i.e. 5390.340 MT. The deemed capacity was fixed in terms of Rule 5 of the Re-Rolling Steel Mill Annual Capacity Determination Rules, 1997. Later on the appellant informed the Central Excise Commissioner that they have made change in the installed machinery which has already the relevant parameters for calculation of the annual capacity. Based on that they sought recalculation of the annual capacity of the mill. The recalculated capacity came to 3488.535 on account of change in the "d" factor. Thus, the change in the machinery resulted in a higher annual capa....
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.... Final Order dated 5-7-2000 in M/s. Pepsu Steel Rolling Mills v. CCE, Chandigarh - 2000 (41) RLT 88 (T) 3.When the appeal went before a Single Member Bench of this Tribunal, the learned Member took the view that Rule 4(2) enables the manufacturers who propose to make any change in the specified parameters of their capacity to approach the Commissioner and obtain his prior approval before making such change. This rule did not contain any other provision to compute the annual capacity of production and that formula provided in Rule 3(3) is the relevant formula for working out the change of annual capacity. The learned Member also expressed the view that Rule 5 was an over-riding provision and that would apply to cases of involv....
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....f annual capacity on account of change in machinery as contemplated in Rule 4 the re-determination is done according to the formula stipulated in Rule 3 only. He, therefore, submitted that the Commissioner was correct in fixing the annual capacity on a deemed basis at the actual production of 1996-97. He also submitted that in a case where the annual capacity goes up on account of changes in machinery, it cannot at all be argued that comparison with the actual production during the financial year 1996-97 would be unreasonable. 6.We find that Rule 5 is in the nature of a rider. It incorporates a deeming provision that in case the annual capacity worked out according to the parameters contained in Rule 3 is less than the actual production ....
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....ery. When changes in machinery cause reduction in the annual capacity of production, fixing the annual capacity of production based on the actual production of a previous year, when the capacity for production of the machinery was higher, would be highly unreasonable and it would amount to comparing the uncomparables. The application of the deeming provision contained in Rule 5 in such a case would be grossly unjust. It would be also impermissible, as such a determination would be without any regard to the annual capacity of production, the basis for the compounded levy. However, the situation is quite different when the modification of the machinery is to augment the annual capacity of production. In the appellant's case, the change in the....