2003 (5) TMI 377 - AT - Central Excise

Production capacity based duty - Annual capacity of production - Demand - Limitation - Provisional assessment - Confiscation and penalty

Summary

Issues Involved:

1. Determination of Annual Capacity of Production (ACP) of the induction furnace.
2. Verification and modification of the furnace capacity.
3. Provisional assessment and time-barred demand of duty.
4. Confiscation of seized goods and imposition of penalty.

Issue-wise Detailed Analysis:

1. Determination of Annual Capacity of Production (ACP) of the induction furnace:

The core issue in this appeal was the determination of the Annual Capacity of Production (ACP) of the induction furnace under the Induction Furnace Annual Capacity Determination Rules, 1997. The appellants claimed that they had reduced the furnace capacity from 8 MT to 4.5 MT due to power constraints. The Commissioner, however, determined the ACP at 8 MT based on the original invoice from the supplier, M/s. Inductotherm (India) Ltd. The appellants argued that the Commissioner's finding was based on conjecture and lacked evidence, as they had informed the department about the modification and provided verification reports showing the reduced capacity.

2. Verification and modification of the furnace capacity:

The appellants contended that they had modified the furnace capacity and informed the department in May 1997. They provided certificates from Mr. B.K. Shukla and a Chartered Engineer, Deepak Shah, and verification by Central Excise officers indicating the reduced capacity. However, the Commissioner relied on a joint physical verification conducted on 28-12-99, which found the capacity to be 7.97 MT. The Commissioner also noted inconsistencies in the statements of the appellants' representatives and the lack of evidence for the claimed modification, such as the absence of records for the purchase of whytheat castables.

3. Provisional assessment and time-barred demand of duty:

The appellants argued that the demand of duty was barred by limitation as there was no provision for provisional assessment in the rules, and the Commissioner exceeded the time limit for determining the capacity. The Commissioner, however, treated the assessments as provisional based on the declarations filed by the appellants and finalized the assessment after determining the ACP. The Tribunal upheld the Commissioner's view, stating that the provisional approval of ACP by the Commissioner was sufficient to make the assessments provisional, and the demand of duty was not time-barred.

4. Confiscation of seized goods and imposition of penalty:

The Commissioner's order included the confiscation of seized goods and imposition of a penalty on the appellants under Rule 173Q(1)(b) of the Central Excise Rules, 1944. The appellants contended that the duty under Section 3A of the Central Excise Act was based on the ACP determined by the Commissioner, making confiscation and penalty unwarranted. The Tribunal agreed with the appellants, setting aside the confiscation and penalty, as the duty was payable based on the ACP.

Conclusion:

The appeal was partly allowed. The Tribunal upheld the demand of duty based on the ACP determined by the Commissioner but set aside the confiscation of seized goods and the imposition of penalty on the appellants.