2004 (6) TMI 505 - AT - Central Excise

Summary

Issues:
1. Demand of duty and penalty confirmed against the appellants.
2. Determination of duty liability based on Annual Capacity of Production (ACP).
3. Closure of the manufacturing unit and its impact on duty liability calculation.
4. Financial hardships claimed by the appellants.

Issue 1: Demand of duty and penalty confirmed against the appellants
The judgment involves two appeals, one against the demand of duty amounting to Rs. 75,75,350 and the other against an equal penalty imposed by the Commissioner of Central Excise. The duty was confirmed under Rule 96ZP(3) of the Central Excise Rules, 1944, read with Sections 3A and 11A of the Central Excise Act. The penalty was imposed in a separate order by the same Commissioner.

Issue 2: Determination of duty liability based on Annual Capacity of Production (ACP)
The appellants were operating under the Compounded Levy Scheme, manufacturing hot re-rolled Iron & Steel products specified for compounded levy. The duty liability was to be discharged based on their Annual Capacity of Production (ACP) determined by the Commissioner of Central Excise. The ACP for the appellants' unit was set at 18,013.885 MTs, and they were required to pay duty accordingly. The appellants did not challenge the ACP determination, which was communicated to them by the Assistant Commissioner. The judgment notes that the appellants should have appealed the ACP determination if they disagreed with it, as it had adverse consequences for them.

Issue 3: Closure of the manufacturing unit and its impact on duty liability calculation
The appellants claimed that their unit was permanently closed on 31-10-98, and this non-operation period should not have been considered in calculating duty liability as per the proviso to sub-section 2 of Section 3A of the Central Excise Act. The judgment acknowledges the closure of the factory and notes that if it remained closed without reopening for manufacturing activity, the benefit of the proviso should apply. The duty liability was recalculated based on the period of operation, resulting in a reduced amount of around Rs. 63 lakhs.

Issue 4: Financial hardships claimed by the appellants
The appellants pleaded financial hardships, stating that the factory had been closed since 31-10-98, and they were facing pending proceedings before the Debt Recovery Tribunal. The judgment mentions that no substantial evidence of financial hardships was provided. After considering all aspects, the appellants were directed to pre-deposit Rs. 35,00,000 within three months. However, waiver of pre-deposit and stay of recovery were granted concerning the penalty amount due to the circumstances of the case.

The judgment concludes by setting a compliance deadline and indicating that the Revenue's applications for early hearing of the appeals would be considered on the specified date.