2005 (8) TMI 564 - AT - Central Excise

Summary

Issues:
- Determination of duty based on Annual Capacity of Production
- Applicability of Annual Capacity Determination Rules
- Interpretation of Section 3A of the Central Excise Act
- Validity of show cause notices
- Imposition of penalty for evasion of duty

Analysis:

1. Determination of duty based on Annual Capacity of Production:
The appeal challenged the duty demand based on the Annual Capacity of Production determined for the previous year. The appellants argued that they had paid duty on actual clearance for the relevant period and contended that demanding duty for 1999-2000 based on the previous year's capacity determination was not valid. The Tribunal noted that the manufacturer can pay duty based on actual production if it is less than the production determined under Section 3A. The Tribunal emphasized that an assessee is not bound forever to pay duty based on the annual capacity of production and can switch to paying duty on actual production. Therefore, the demand for duty based on the previous year's capacity determination was not justified.

2. Applicability of Annual Capacity Determination Rules:
The appellant argued that the annual capacity of production must be determined annually as per the Induction Furnace Annual Capacity Determination Rules, 1997. They contended that the determination for 1998-1999 did not automatically apply to 1999-2000. The Tribunal agreed that the determination of annual capacity for a previous year does not bind the assessee to that system of payment forever, allowing for a switch to paying duty on actual production.

3. Interpretation of Section 3A of the Central Excise Act:
The appellant cited various legal precedents to support their argument that duty demand should be based on actual production, even if the assessee had initially opted for a different procedure. They referred to the Supreme Court's decision in CCE & C v. Venus Castings (P) Ltd., which highlighted that different procedures under the Act and Rules are alternative and can be opted for based on the assessee's choice.

4. Validity of show cause notices:
The appellant contended that the show cause notices were premature and invalid as the due date for payment of duty had not passed when the notices were issued. The Tribunal agreed that the notices were premature, further weakening the basis for the duty demand.

5. Imposition of penalty for evasion of duty:
The appellant argued that the imposition of a penalty was unjustified as there was no evidence of an intention to evade payment of duty. The Tribunal concurred, stating that there was no reason for imposing a penalty in the absence of such evidence.

In conclusion, the Tribunal allowed the appeal, providing consequential relief to the appellants based on the above analysis and considerations.