2013 (3) TMI 236 - AT - Central Excise

Ordinarily produces v/s incidentally produces - differential duty - proceedings against assessee for the alloy steel ingots and billets on the ground that Explanation to Rule 2 of the Induction Furnace Annual Capacity Determination Rules, 1997 covers only goods ordinarily manufactured and goods manufactured incidentally and the alloy steel goods are not produced incidentally - Held that - Appellant had manufactured non-alloy steel ingots to the extent of 2503.252 MT and produced alloy steel castings only to the extent of 168.5 MT, which works out to around 5% of the totally manufactured quantity of the non-alloy steel castings as notified goods . Thus, the Appellant predominantly manufactured the notified goods , i.e. non-alloy steel castings. Thus the Appellant were manufacturing predominantly notified goods (non-alloy steel castings) under the Compounded Levy Scheme. As such, the duty paid in respect of alloy steel castings under the Compounded Levy Scheme was in accordance with law and thus,the Commissioner s Order is not sustainable. In favour of assessee.

Summary

Issues:
Interpretation of the term 'incidentally' in the Explanation to Rule 2 of the Induction Furnace Annual Capacity Determination Rules, 1997.

Analysis:
The Appellant filed an Appeal against the Order-in-Original confirming a demand notice for differential duty and penalty. The dispute arose from the classification of alloy steel castings produced alongside non-alloy steel ingots and billets. The Appellant opted for the Compounded Levy Scheme under the Central Excise Rules, 1944. The Department contended that alloy steel goods were not produced incidentally, leading to the demand notice. The Appellant argued that the term 'incidentally' should be interpreted as 'occasional' in the context of their production ratio. The Tribunal previously allowed the Appellant's Appeal, citing similar cases. However, the High Court remitted the case back to the Tribunal for re-hearing.

The Appellant's Senior Advocate argued that non-alloy steel was the primary product, while alloy steel was produced incidentally, supported by production data. The Advocate relied on previous decisions to support their interpretation of 'incidentally.' The Department's representative countered, stating that the classification list for alloy steel castings indicated they were not produced incidentally. The Appellant also raised a time limitation defense due to the delayed demand raised by the Department.

The Tribunal analyzed the explanation regarding the production of non-alloy steel and incidental production of castings. The term 'incidentally' was interpreted as 'occasional' in contrast to 'normally' or 'ordinarily.' Considering the production data provided, the Tribunal found that the Appellant predominantly manufactured non-alloy steel castings, which were the 'notified goods' under the Compounded Levy Scheme. Citing a previous case, the Tribunal held that since the production was predominantly of non-notified goods, the duty liability should be under the normal procedure, not the disputed Section 3A. Consequently, the Tribunal set aside the Commissioner's Order, allowing the Appellant's Appeal.

In conclusion, the Tribunal's detailed analysis of the term 'incidentally' in the context of production ratios and previous decisions led to the setting aside of the demand notice and penalty imposed on the Appellant. The judgment clarified the interpretation of the term and upheld the Appellant's position as predominantly manufacturing the 'notified goods' under the Compounded Levy Scheme, ensuring compliance with the applicable laws.