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2011 (4) TMI 1135 - AT - Central ExciseDetermination of installed capacity - total number of Hot air stenters - Held that - Rules framed under Notification No.42/98 is not having acceptable method to arrive at the capacity of production, which is absolutely necessary to levy and collect duty of excise under Section 3A of the Act. So, the said rules cannot be adopted for determination of excise duty as they cannot level the correct capacity of production of the factory for the purpose of levying excise duty. So, the Rule 3 of the Rules issued in the Notification No.42/98 cannot be sustained as they are ultra vires Section 3A of the Act, proceedings against the respondents are not sustainable, appeals filed by the Revenue are dismissed
Issues:
1. Determination of the number of hot air stenters and chambers for excisable goods manufacturing. 2. Discrepancy in the levy of compounded duty and subsequent demands by the Revenue. 3. Challenge to the validity of Notification No.42/98-CE(NT) dated 10/12/98 under the Central Excise Act, 1944. Issue 1: Determination of stenters and chambers The case involved the determination of the number of hot air stenters and chambers installed in a factory for manufacturing excisable goods. The Commissioner of Central Excise issued various letters determining the count of stenters and chambers for different years, leading to disputes and appeals by the assessee. The issue revolved around the accuracy of the calculations and the imposition of compounded levy per chamber per month. Issue 2: Discrepancy in compounded duty levy The Assistant Commissioner observed a discrepancy in the payment of compounded levy by the assessee for a specific period, leading to a short levy of duty. Subsequent show-cause notices were issued by the Range Superintendent proposing recovery of differential duty, interest, and penalties under Rule 96ZQ of the Central Excise Act, 1944. This discrepancy formed the basis for demands, interest, and penalties imposed by the Revenue, which were challenged by the respondents before the appellate authority. Issue 3: Challenge to Notification No.42/98-CE(NT) validity The legal validity of Notification No.42/98-CE(NT) dated 10/12/98 was challenged by the respondents, arguing that it was ultra vires the provisions of the Central Excise Act, 1944. The contention was based on the requirement under Section 3A of the Act for determining annual production capacity, which was allegedly not met by the notification. The respondents relied on previous court decisions to support their argument, emphasizing the need for an acceptable method to calculate production capacity for excise duty purposes. In the judgment, the Tribunal considered the arguments presented and referred to the decision in the case of Valson Dyeing Bleaching & Printing Works. The Tribunal highlighted the issue of whether Notification No.42/98-CE(NT) was in line with the statutory provisions of the Central Excise Act, particularly regarding the determination of production capacity. Citing previous court decisions, the Tribunal concluded that the rules under the notification did not provide an acceptable method to ascertain production capacity accurately for excise duty purposes. Consequently, the proceedings against the respondents were deemed unsustainable, and the appeals filed by the Revenue were dismissed.
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