2011 (4) TMI 1103 - AT - Central Excise

Compounded levy scheme - determination of annual capacity - Held that - Commissioner observed that the abatement for closure of a stenter was available only when the factory was closed whereas the Commissioner while passing the order was not considering abatement request but was determining the annual capacity of production under the Rules 2000 based on the declaration filed by the appellant, matter is remanded to the original adjudicating authority who shall decide the annual capacity afresh in terms of Rule 5

Summary

Issues:
1. Interpretation of Notification 11/2000-N.T. and Notification 14/2000-N.T. regarding abatement on closure of a factory or a hot air stenter.
2. Application of Rule 7(a) of Rule 96ZQ of Central Excise Rules, 1944 in determining abatement.
3. Compliance with Explanation IV under Rule 5 of Rules 2000 for determination of annual capacity.
4. Validity of the order determining duty liability based on sealed stenter.

Analysis:

1. The appellant, a partnership concern in man-made fabrics, was under the compounded levy scheme. They informed the department about the closure of a stenter and requested sealing, which was done. Notifications 11/2000-N.T. and 14/2000-N.T. replaced old rules and provided for abatement only on factory closure, not stenter closure. The appellant declared the sealed stenter but it was still considered for duty liability, which was challenged.

2. The Commissioner relied on Rule 7(a) of Rule 96ZQ to deny abatement for stenter closure, requiring complete factory closure. However, the appellant argued that Rule 2000's Explanation IV exempts sealed stenters from annual capacity determination. The Commissioner's basis for the order was deemed incorrect.

3. The Tribunal found that the impugned order aimed to determine annual capacity under Rule 2000, not abatement. The Commissioner erred in considering abatement when the focus was on annual capacity. Explanation IV of Rule 5 exempts sealed stenters from capacity calculation, which was applicable in this case. The order was deemed unsustainable, and the appeal was allowed for a fresh determination of annual capacity.

4. The Tribunal remanded the matter to the original adjudicating authority to recalculate annual capacity without considering the sealed stenter, as per Rule 5. The sealed stenter, removed during the relevant period, should not have been included in the capacity determination. The impugned order was set aside, and a fresh determination was ordered in compliance with the relevant rules and explanations.

This detailed analysis of the judgment highlights the issues of interpretation, application of rules, compliance with notifications, and the validity of the order in question, providing a comprehensive overview of the legal proceedings and decision by the Appellate Tribunal CESTAT, Mumbai.