2005 (2) TMI 590 - AT - Central Excise

Summary

Issues:
1. Determination of Annual Capacity of Production (ACP) under Compounded Levy Scheme.
2. Validity of demand of duty without a valid order of determination of ACP.
3. Compliance with Rule 4 of the Hot Re-rolling Steel Mills Annual Capacity Determination Rules, 1997.
4. Applicability of penalties in case of non-compliance with Section 35F of the Central Excise Act.

Analysis:

Issue 1: Determination of Annual Capacity of Production (ACP) under Compounded Levy Scheme
The appellants were working under the Compounded Levy Scheme and had to discharge duty liability based on the ACP determined by the Commissioner. The Commissioner provisionally fixed the ACP at 10,378.163 MTs and later finally at 11,599.800 MTs. However, the appellants did not receive any formal order from the Commissioner regarding the ACP determination. The absence of a valid order determining ACP raised a significant issue in the case.

Issue 2: Validity of demand of duty without a valid order of determination of ACP
The Department issued show-cause notices demanding duty from the appellants based on the ACP allegedly determined by the Commissioner. The appellants argued that without a valid order of determination of ACP, any demand of duty under the Compounded Levy Scheme was not legally sustainable. The Tribunal found merit in this argument and emphasized the necessity of a formal order from the Commissioner to validate the duty demand.

Issue 3: Compliance with Rule 4 of the Hot Re-rolling Steel Mills Annual Capacity Determination Rules, 1997
Rule 4 of the ACD Rules required the Commissioner to determine ACP quasi-judicially and communicate the order to the manufacturer. The Tribunal highlighted that any communication from a subordinate officer regarding the ACP determination, without a formal order from the Commissioner, did not fulfill the legal requirements. Setting aside the Assistant Commissioner's proceedings, the Tribunal directed the Commissioner to determine the ACP of the appellant-unit in accordance with law and principles of natural justice.

Issue 4: Applicability of penalties in case of non-compliance with Section 35F of the Central Excise Act
The Commissioner (Appeals) directed the appellants to pre-deposit a certain amount towards duty and penalty as per Section 35F of the Central Excise Act. However, the appellants did not comply with this directive, leading to the dismissal of their appeal. The Tribunal, considering the absence of a valid ACP order, set aside the penalties imposed and emphasized the importance of procedural compliance in such cases.

In conclusion, the Tribunal allowed the appeal, emphasizing the necessity of a formal order from the Commissioner for the determination of ACP under the Compounded Levy Scheme. The judgment highlighted the importance of procedural adherence and the communication of orders in compliance with the relevant rules and principles of natural justice.