2003 (9) TMI 779 - AT - Central Excise

Summary

Issues Involved:
1. Determination of Annual Production Capacity (ACP)
2. Re-determination of ACP by the Commissioner
3. Applicability of ACP to Induction Furnace installed in 1999
4. Option for payment of duty under Rule 96ZO(3) and Section 3A(4) of the CEA, 1944

Detailed Analysis:

1. Determination of Annual Production Capacity (ACP):
The Commissioner re-determined the ACP of the furnace installed in the assessee's factory to 11520 MT from the earlier 9600 MT based on Sub-rule 1 of Rule 3 of the Induction Furnace Annual Capacity Determination Rules, 1997. The Commissioner also confirmed a demand of Rs. 29,00,000/- as duty short paid by the assessee for the period from 9/97 to 1/2000 under Section 11A of the CEA 1944, and imposed an equal amount of penalty under Rule 96ZO of the CER 1944. Interest at 18% was directed to be communicated and paid by the assessee.

2. Re-determination of ACP by the Commissioner:
The Commissioner initially fixed the ACP based on the assessee's declaration and a supplier's certificate, but later sought expert opinion from the National Metallurgical Laboratory (NML), which indicated a higher capacity. Documents recovered during a search showed the furnace capacity was 3.6 MT instead of the declared 3 MT. The Commissioner issued show cause notices alleging misdeclaration and suppression of actual capacity, proposing to re-determine the ACP and demand differential duty.

3. Applicability of ACP to Induction Furnace installed in 1999:
The assessee argued that the Commissioner's order dated 23.3.1998, which fixed the ACP at 9600 MT, should apply to both furnaces installed in 1997 and 1999. However, the order impugned only dealt with one furnace, and the Commissioner was directed to verify whether a second furnace was installed in 1999 and, if so, to fix the ACP accordingly.

4. Option for payment of duty under Rule 96ZO(3) and Section 3A(4) of the CEA, 1944:
The assessee contended that they should be allowed to opt for assessment under Section 3A(4) based on actual production if the ACP is re-determined. The Hon'ble Apex Court in CCE & Cus. v. Venus Castings (P) Ltd. held that an assessee opting for Rule 96ZO(1) may opt out for a subsequent period but cannot combine procedures. Thus, the assessee was not permitted to opt out of the scheme during the financial year once opted.

Conclusion:
The Tribunal found that the Commissioner did not determine the ACP in accordance with Rule 3 of the Induction Furnace Annual Capacity Determination Rules, 1997, as he failed to base it on the manufacturer's or supplier's invoice. The Tribunal set aside the impugned order and remanded the matter for re-determination of the ACP in accordance with law, ensuring the assessee is given an opportunity to confront the findings and present evidence. The appeal was allowed by remand for de novo proceedings.