2012 (12) TMI 158 - HC - Central Excise

Determined the annual production capacity - Extended Period of limitation - Assessee is manufacturer of the rerolled product of non-alloy steel - Duty of the Excise is leviable in terms of the provisions of Section 3A of the Central Excise Act, 1944 - Based on the capacity of production of their factory - the annual capacity determined by the assessee under Sub Rule 3 of Rule 3 of the Rules of 1997 was 3044.531 for F.Y 1996-97 metric ton against which the actual production of the Revenue was 6095.795 metric ton F.Y 1996-97 Commissioner review his own order retrospectively, for the determination of the annual production capacity - SCN was issued on the basis of annual capacity of production of assessee s unit under Rules of 1997 w.e.f. 01.09.1997 will be as per actual production of the year 1996-97 and demanded differential duty for the year 1997-98 and 1998-99. Held that - The duty leviable for the produce of the mill in excess to the annual capacity of production determined by the formula under sub-Rule 3 of Rule 3 will be the quantity leviable for the duty. In Rule 5, even after declaring that actual production of the mill will be the annual capacity of the production shall be determined by the formula under sub-Rule 3 of Rule 3, but it has been restricted to apply for only financial year 1996-97. In view of the Rule 5 also, even actual production of previous year i.e. for the F.Y 1996-97, by application of the deeming Clause under Rule 5, that is not the basis annual capacity of production for the subsequent years. Therefore said notice was barred by the period of limitation of six months. In favour of assessee

Summary

Issues Involved:
1. Determination of Annual Capacity of Production (ACP) under Rule 3 and Rule 5 of the Hot Rerolling Steel Mills Annual Capacity Determination Rules, 1997.
2. Applicability of Rule 5 for subsequent years.
3. Legality of retrospective application of ACP determination.
4. Limitation period for issuing show cause notices.

Issue-wise Detailed Analysis:

1. Determination of Annual Capacity of Production (ACP) under Rule 3 and Rule 5:
The assessee, a manufacturer of rerolled non-alloy steel products, was served with a show cause notice stating that the ACP for their unit for the year 1996-97 was determined to be 3044.531 metric tons under Sub-rule 3 of Rule 3 of the Annual Capacity Determination Rules, 1997. However, the actual production was 6095.795 metric tons. According to Rule 5, if the actual production exceeds the determined ACP, the actual production should be deemed as the ACP for duty purposes. The Assessing Officer directed the assessee to pay duty based on the higher actual production of 6095.795 metric tons, along with penalties and interest as per Rule 96ZR.

2. Applicability of Rule 5 for Subsequent Years:
The tribunal observed that Rule 5 applies only to the financial year 1996-97 and does not extend to subsequent years. The Commissioner had retrospectively applied the higher actual production of 1996-97 as the ACP for subsequent years (1997-98 and 1998-99) without re-determining the ACP under Sub-rule 3 of Rule 3 for those years. The court clarified that for subsequent years, ACP must be determined anew under Sub-rule 3 of Rule 3, and previous years' production cannot be the sole criterion.

3. Legality of Retrospective Application of ACP Determination:
The tribunal held that the Commissioner could not review his own order retrospectively. The show cause notice issued in 1999, demanding differential duty for 1997-98 and 1998-99 based on the 1996-97 actual production, was deemed improper. The court agreed, stating that the retrospective application of ACP determination without following the prescribed procedure under Sub-rule 3 of Rule 3 was invalid.

4. Limitation Period for Issuing Show Cause Notices:
The tribunal found that the show cause notice issued on 12.3.1999, proposing the recovery of differential duty for the periods 1997-98 and 1998-99, was barred by the six-month limitation period. The court upheld this finding, noting no suppression of facts by the assessee that could justify an extended limitation period.

Conclusion:
The court dismissed the Revenue's petition, affirming the tribunal's decision that Rule 5's deeming provision for ACP applies only to the financial year 1996-97 and not subsequent years. The retrospective application of ACP determination was invalid, and the show cause notice was barred by the limitation period. The assessee was not liable to pay differential duty based on the higher actual production of 1996-97 for the subsequent years.