2003 (7) TMI 407 - AT - Central Excise

Summary

Issues:
- Determination of annual capacity of re-rolling mills
- Applicability of Rule 5 of Hot Re-rolling Steel Mill Annual Capacity Determination Rules, 1997 after a change in parameters

Analysis:
The appeal before the Appellate Tribunal CESTAT, New Delhi involved a dispute regarding the determination of the annual capacity of re-rolling mills by the Commissioner of Central Excise. The appellants contended that they manufacture hot re-rolled products of non-alloy steel under the compounded levy scheme. They applied for a change in the parameters of their re-rolling mills, which was approved by the Commissioner. However, the Commissioner determined their annual production capacity at 6116.160 MT, higher than the calculated capacity of 3103.89 MT based on the formula. This determination was made under Rule 5 of the Hot Re-rolling Steel Mill Annual Capacity Determination Rules, 1997, which states that if the calculated capacity is less than the actual production in the previous financial year, the actual production shall be considered as the annual capacity.

The appellants relied on a judgment by a Larger Bench of the Tribunal and a decision of the High Court of Punjab and Haryana to argue that Rule 5 should not apply when there is a change in the mill's parameters. They emphasized that after a change in parameters, the capacity should be re-determined without invoking Rule 5. On the other hand, the Revenue cited a different case to support the application of Rule 5 even after a change in parameters for re-determining the annual capacity of production.

The Tribunal noted the principle of judicial discipline, stating that decisions of higher authorities must be followed by lower authorities regardless of their correctness. Referring to the judgments cited by the appellants, the Tribunal concurred that Rule 5 should not be applied when the capacity is re-determined following a change in mill parameters. Quoting the High Court, the Tribunal highlighted that if the capacity decreases due to parameter changes, it would be unjust to impose excise duty based on the earlier higher capacity. Consequently, the Tribunal set aside the impugned order and allowed the appeal, directing the Commissioner to determine the annual production capacity considering the change in parameters of the re-rolling mill.