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2011 (7) TMI 10 - SC - Central ExciseProduction capacity based duty - Section 3A of the Central Excise Act, 1944 - Held that - Section 3A of the Act is an exception to Section 3 of the Act - the charging Section and being in nature of a non obstante provision, the provisions contained in the said Section override those of Section 3 of the Act. Rule 3 of 1997 Rules framed in terms of Section 3A(2) of the Act lays down the procedure for determining the annual capacity of production of the factory. The principle that a taxing statute should be strictly construed is well settled. It is equally trite that the intention of the Legislature is primarily to be gathered from the words used in the statute. Once it is shown that an assessee falls within the letter of the law, he must be taxed however great the hardship may appear to the judicial mind to be. Rule 5 of the 1997 Rules will be attracted for determination of the annual capacity of production of the factory when any change in the installed machinery or any part thereof is intimated to the Commissioner of Central Excise in terms of Rule 4(2) of the said Rules. - Decided in favor of revenue.
Issues Involved:
1. Applicability of Rule 5 of the 1997 Rules when there is a change in the technical parameters of a rolling mill. 2. Interpretation and application of Section 3A of the Central Excise Act, 1944. 3. Validity of the High Court's decision rejecting the reference petition by the Commissioner of Central Excise. 4. Uniformity in the application of fiscal rules and the Central Board of Direct and Indirect Taxes' guidelines for filing appeals. Detailed Analysis: 1. Applicability of Rule 5 of the 1997 Rules: The core issue was whether Rule 5 of the 1997 Rules applies when a manufacturer changes the installed machinery or any part thereof, necessitating re-determination of the annual capacity of production in terms of Rule 4(2). The Supreme Court held that Rule 5, which states that if the annual capacity determined by the formula in Rule 3(3) is less than the actual production during the financial year 1996-97, the annual capacity shall be deemed equal to the actual production of that year, must be applied even when there is a change in the machinery parameters. The Court emphasized that the language of Rule 5 is clear and unambiguous, and it must be given full effect. 2. Interpretation and Application of Section 3A: Section 3A of the Central Excise Act, 1944, was introduced to levy excise duty based on the annual capacity of production to curb evasion in certain sectors. The Court noted that Section 3A, being a non obstante provision, overrides Section 3 of the Act. The determination of annual capacity under Section 3A is to be strictly as per the formula in Rule 3(3) of the 1997 Rules. The Court clarified that re-determination due to changes in machinery parameters must also follow this formula, thereby invoking Rule 5. 3. Validity of the High Court's Decision: The High Court had rejected the Commissioner's reference petition, holding that Rule 5 could not be invoked when the technical parameters of the rolling mill had changed. The Supreme Court found this view erroneous, noting that the High Court's finding that the annual production had significantly reduced was factually incorrect. The Supreme Court held that the High Court's interpretation was fallacious and that Rule 5 must apply regardless of changes in technical parameters. 4. Uniformity in Application and Guidelines for Filing Appeals: The respondents argued that the revenue had accepted similar decisions in other cases, and thus, could not challenge the orders in the present appeals. The Supreme Court rejected this argument, stating that the revenue is not precluded from challenging an order in one case merely because it did not do so in another. However, the Court acknowledged the need for a uniform policy by the Central Board of Direct and Indirect Taxes to avoid allegations of malafides and ensure consistency in filing appeals. Conclusion: The Supreme Court set aside the High Court orders and restored the orders of the Commissioners of Central Excise. The appeals were allowed with costs, emphasizing the need for strict adherence to the language of fiscal statutes and the necessity for a uniform policy in filing appeals by the revenue authorities.
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