TMI Blog2000 (12) TMI 116X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 calculation of capacity of production among other things, in the case of "any chan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al 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 capacity. Since this augmented annual capacity was also lower than the deemed capacit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 involving change of machinery also. In view of the reliance placed by the appellants on earlier decisions of the Tribunal, the learned Member referred the case to the Hon'ble President for placing the issue before Larger Bench. The issue has, thus, come before us. 4.The issue involved is wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 of the mill during the financial year 1996-97, then the annual capacity shall be deemed to be equal to the annual production of the mill during the financial year 1996-97. Thus, the deeming provision makes duty payable on the actual production of 1996-97. In view of this clause, wherever t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omparing 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 "d" factor has increased the annual production capacity from 3154.253 MT to 3488.535 MT. Therefore, the basis of compounding is a higher capacity of production and not a lower capacity of production. Since the appellant had produced a much higher quantity at 5390.340 MT in 1996-97, making u ..... X X X X Extracts X X X X X X X X Extracts X X X X
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