2002 (7) TMI 785 - HC - Central Excise

Summary

Issues:
Interpretation of Hot Re-Rolling Steel Mills Annual Capacity Determination Rules, 1997 in the context of excise duty calculation and application of Rule 5.

Analysis:
The petitioner challenged an order requiring deposit of differential duty confirmed by the Deputy Commissioner to avoid dismissal of appeal under Section 35F of the Central Excise Act, 1944. The controversy centered around the interpretation of Hot Re-Rolling Steel Mills Annual Capacity Determination Rules, 1997, specifically Rule 3 which outlines the formula for determining annual production capacity. Rule 4 deals with changes in machinery affecting production capacity, while Rule 5 addresses situations where determined capacity is less than actual production in a previous year.

The petitioner's factory had a change in parameter 'd' approved by the Commissioner of Central Excise, resulting in a revised annual production capacity. Despite this change, show cause notices were issued based on the actual production in 1996-97, leading to a dispute. The petitioner contended that Rule 5 should not apply when machinery changes reduce production capacity, citing a precedent involving reduction in machinery capacity.

Referring to a larger bench decision of CEGAT, the Court emphasized that Rule 5 is relevant when there is no change or an increase in production capacity due to machinery alterations. However, it should not apply in cases of reduced capacity resulting from machinery modifications. The Court upheld the CEGAT's interpretation of Rules 3, 4, and 5, rejecting the application of Rule 5 in the petitioner's case due to reduced production capacity post-machinery change.

Based on the above analysis, the Court allowed the petition, quashing the orders requiring deposit of duty and directing the Commissioner (Appeals) to hear the appeal without pre-deposit. The Court's decision aligned with previous rejections of reference applications based on the larger bench decision, affirming the correctness of the interpretation provided by CEGAT.

In conclusion, the Court's judgment clarified the application of Rule 5 in cases of machinery changes affecting production capacity, ensuring adherence to the provisions outlined in the Hot Re-Rolling Steel Mills Annual Capacity Determination Rules, 1997.