2003 (5) TMI 69 - HC - Central Excise

Summary

Issues Involved:
1. Constitutional validity of Section 3A of the Central Excise Act, 1944.
2. Abatement of duty under Section 3A(3) of the Act.
3. Payment of duty on compounding basis under Rule 96ZO(3).

Issue-wise Detailed Analysis:

1. Constitutional Validity of Section 3A of the Central Excise Act, 1944:

The petitioner challenged the constitutional validity of Section 3A of the Act, arguing that excise duty should be levied on goods actually produced or manufactured, not on the capacity of production. The court noted that Section 3A was enacted to levy duty based on annual production capacity, with provisions for abatement if the factory did not produce goods for a continuous period of not less than seven days. The court referenced a Supreme Court decision where the validity of Section 3A was indirectly upheld, as the manufacturers agreed to pay duty based on actual production for the entire year. Consequently, the court found no substance in the petitioner's challenge to the constitutional validity of Section 3A.

2. Abatement of Duty under Section 3A(3) of the Act:

The petitioner claimed abatement for periods when one of its two induction furnaces was closed. The court examined Section 3A(3) and Rule 96ZO(2), which stipulate that abatement is permissible only if the entire factory is closed for a continuous period of not less than seven days. Since the petitioner's factory was never completely closed, as one furnace was always operational, the court concluded that the petitioner was not entitled to abatement. The court emphasized that the provisions clearly required the closure of the entire factory, not just individual units.

3. Payment of Duty on Compounding Basis under Rule 96ZO(3):

The petitioner had opted to pay duty on a compounding basis under Rule 96ZO(3), which allows manufacturers to pay a fixed sum based on the total furnace capacity installed in the factory. The court highlighted that Rule 96ZO(3) and Section 3A(4) provide alternative methods for duty payment, and once a manufacturer opts for one method, they cannot claim benefits under the other. The court referenced the Supreme Court's decision in the Venus Castings case, which upheld the validity of Rule 96ZO and confirmed that manufacturers who opt for compounding cannot later claim abatement or duty determination based on actual production under Section 3A(4). Since the petitioner had chosen the compounding method, they were precluded from seeking abatement or re-determination of duty.

Conclusion:

The court dismissed the writ application, stating that the petitioner was not entitled to abatement under Section 3A(3) as the factory was never fully closed, and having opted for the compounding method under Rule 96ZO(3), the petitioner could not claim benefits under Section 3A(4). The constitutional validity of Section 3A was upheld in line with previous Supreme Court rulings.