2013 (7) TMI 835 - HC - Central Excise

Whether the Commissioner having once determined the Annual Capacity of Production, can, on discovery of new and additional evidence/material, which the assessee failed to disclose or suppressed, can redetermine the same? - Assessee provided the information for being assessed on the basis of certificate from manufacturer of the Furnace about the capacity of furnace to be 2.5 MT to 3.0 MT for melting on that basis annual capacity production was determined provisionally on 9600 TCF vide letter dated 29.09.1997 Held that - During investigation by Anti-Evasion, a copy of contract under the influence of respondent between the assessee unit and manufacturer was obtained through the Directorate General of the Central Excise Intelligence (erstwhile DGAE ) from the record under their possession. Technical data of this contract revealed the furnace of type ITM - 4/1500 KW was supplied by the manufacturer M/s ABB Limited to the assessee unit which had capacity of 3390 KG, which was further corroborated from the facts mentioned in the statement of Shri J.S . Rao , DGM of manufacturer, Shri Tushar Mewar , Senior Marketing Manager of the manufacturer, statement of Shri Sunil Bansal , Director of the assessee - Second proviso to Section 3A (2) of the Act of 1944 provides that in a case where the factor relevant to the production is altered or modified at any time during the year, the annual production shall be redetermined on a proportionate basis having regard to such alteration or modification. If there is an altertion or modification in any factor relevant to production specificed , such production shall have to be redetermined as held by the Supreme Court in Para 22 of CCE v. Doaba Steel Rolling Mills 2011 (7) TMI 10 - SUPREME COURT OF INDIA Matter remanded to Tribunal.

Issues Involved:
1. Whether the redetermination of Annual Capacity of Production by the Commissioner amounts to a review of its own order.
2. The validity of the Commissioner's power to redetermine the annual capacity of production based on new evidence.
3. Allegations of willful suppression of facts by the assessee.
4. The relevance and admissibility of various certificates and statements regarding furnace capacity.
5. The applicability of Section 11A of the Central Excise Act, 1944 in this context.

Issue-wise Detailed Analysis:

1. Redetermination of Annual Capacity of Production as a Review:
The core question addressed was whether the redetermination of the annual capacity of production by the Commissioner equates to a review of its own order. The court noted that the Commissioner initially determined the annual capacity based on the information and documents provided by the assessee, which were later found to be incorrect. The Commissioner's redetermination was not considered a review but a necessary correction based on new and additional evidence that came to light, establishing that the initial determination was based on false information. The court emphasized that Section 11A and Rule 3 of the Induction Furnace Annual Capacity Determination Rules, 1997, allow for redetermination under such circumstances.

2. Validity of the Commissioner's Power to Redetermine:
The court held that the Commissioner has the authority to redetermine the annual capacity of production if new evidence or material facts are discovered that were previously suppressed or not disclosed by the assessee. The decision was supported by the precedent set in the case of M/s Perfect Engineering Works Vs. CCE Baroda and the Division Bench judgment of the Jharkhand High Court in Union Enterprises Vs. Union of India, which affirmed the Commissioner's power to reassess production capacity in light of new evidence.

3. Allegations of Willful Suppression by the Assessee:
The court found substantial evidence indicating that the assessee, in collusion with the manufacturer, willfully suppressed the actual capacity of the furnace to evade the correct amount of central excise duty. Statements from key individuals, including the Director of the assessee unit and representatives from the manufacturer, supported the allegation of suppression. The court upheld the Commissioner's findings of willful misstatement and fraud against the revenue.

4. Relevance and Admissibility of Certificates and Statements:
The court examined various certificates and statements regarding the furnace capacity. It concluded that the initial certificates provided by the manufacturer were misleading and not relevant for determining the actual capacity. The statements from the manufacturer's representatives and the technical data obtained from the contract were considered more reliable and accurate. The court dismissed the relevance of the National Institute of Secondary Steel Technology's certificate, as it was not authorized by the department and did not align with the newly discovered evidence.

5. Applicability of Section 11A of the Central Excise Act, 1944:
The court clarified that Section 11A empowers the Central Excise Officer to determine duty when it has not been levied or paid correctly due to reasons such as fraud or suppression of facts. The Commissioner's redetermination of the annual capacity was justified under this section, as the initial determination was based on incorrect and suppressed information provided by the assessee. The court affirmed that the Commissioner could consult technical authorities and reassess the capacity based on accurate and newly available data.

Conclusion:
The court directed the Tribunal to state and refer the following question to the High Court under Section 35H of the Central Excise Act, 1944: "Whether the Commissioner having once determined the Annual Capacity of Production, can, on discovery of new and additional evidence/material, which the assessee failed to disclose or suppressed, redetermine the same?" The petition was disposed of accordingly.

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