TMI Blog2008 (8) TMI 285X X X X Extracts X X X X X X X X Extracts X X X X ..... lved. 2. The facts have been not notied from C.W.P. No. 4806 of 2005. 3. The assessee herein is having a rolling mill and is engaged in manufacture of iron and steel products classifiable under Chapter 72 of the Central Excise Tariff Act, 1985. In the year 1997, the Central Government introduced Compounded Levy Scheme for payment of excise duty on certain goods. As a result thereof Section 3A was introduced in the Central Excise Act, 1944 (for short, 'the Act'). Under the scheme of compounded levy of duty, excise duty was payable on the capacity of production and not on the basis 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion Rules provided that in case the annual capacity determined by the formula provided for 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 1996-97. 6. In terms of the Capacity Determination Rules, the assessee submitted application to the Commissioner of Central Excise on 8-9-1997 in the form of declaration under Rule 96ZP(4) of the Rules and Rule 3(2) of the Capacity Determination 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... installed near the finishing stand but was found not connected with any rolling mill stand and was lying idle. The sketch diagram of the roiling mills as it was found at the time of visit by the staff on 30-1-1998 was also drawn in the hand of the partner of the assessee. 10. As narrated above, the finishing stand of the rolling mills was found coupled with fourth stand and running with pinion stand 'A' and the above product was being rolled finally through this finishing stand. Pinion stand (declared by the assessee for determination of annual production capacity in declaration dated 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its production, repair of machinery etc. according to its best judgment, once he discharges duty liability at the compounded rate. That the last pinion stand was not connected at the particular time of verification is of no significance. The strength and weakness of compounded levy system is that what actually happened from day to day on the production front is not material to the payment of tax. The Revenue is not to ask for a higher levy based on the actual production. Nor is the assessee entitled to any remission for short period of dislocation. The exceptions to this arrangement is prolonged 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order dated 22-12-2000. The contention of the appellant is that revenue is asking for duty on annual basis in pursuance to the order dated 16-10-97 passed by the Central Excise. We find that order is already set aside by the Tribunal and matter was remanded in pursuance to the remand order. The Commissioner of Central Excise again passed a fresh order which is a subject matter of proceedings and appeal was allowed with consequential relief. In these circumstances, we find no clarification is required in respect of the final order passed by the Tribunal. Application is dismissed." 15. 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 refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the simple reason that if certain parameters were to be changed by the assessee, even if for a short duration, the same were going to have substantial effect on the production capacity of the assessee for which intimation in advance was required to be given to the department. He prays for dismissal of the writ petition and also a direction to the Tribunal to refer the question of law, as is claimed in the petition filed by the Revenue. 19. We have heard learned counsel for the parties and perused the paper book. 20. It may be noticed here that vires of Section 3 of the Act was challenged 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 enga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cted at the time of visit by the Preventive Staff. The Commissioner, while determining the capacity, had not accepted the explanation of the assessee that it was for a short duration that pinion stand 'C' was not working and was under repair and merely on that basis, higher capacity of production could not he determined. The Tribunal accepted the contention of the assessee finding the same to be reasonable and set aside the order of the Commissioner. However, finally it was held that the original determination of the capacity by the Commissioner was according to rules. It did not specify as to which original determination 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the machinery being under repair on the date of inspection by the Preventive Staff of the Department is concerned, we concur with that. If on a particular date a part of the machinery was not in working condition and was under repair, for which sufficient material was placed on record by the assessee, we do not find that there was any justification for re-determining the annual capacity production merely on the basis thereof when there was no other material available with the department to corroborate the same. As far as setting aside of the order passed by the Tribunal determining the capacity at 22,033.499 metric tonnes on the basis of the material collected at the time of visit by the Preventive Staff, we do not find any illegality in the order passed by the Tribunal. 28. However, keeping in view our above discussion and also the fact that annual capacity of production at 15,796.150 metric tonnes can very well be determined in terms of sub-rule (5) of the Capacity Determination Rules on the basis of admitted facts on record, we deem it appropriate to order accordingly. The respondents shall be entitled to recover the amount of excise duty from the assessee considering its ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
