2016 (9) TMI 179 - AT - Central Excise

Demand alongwith interest and penalty for the month of September, 1997 - duty liabiliy calculated on proportionate production capacity in respect of two furnaces - appellant contended that although they had two furnaces in their factory but only one was running in condition, and/or use - Held that - it is an admitted fact that the appellant had intimated by their option letter that they will be operating only one furnace and it appears that Revenue failed to seal the other furnace. Accordingly, in absence of evidence that the appellant operated both their furnaces for the month of September, 1997, the demand for the two furnaces together have been raised on assumption and presumption, which is not tenable. Hence, the appellant is liable to pay duty on the basis of production capacity only for one furnace for the month of September, 1997, or ₹ 7.5 lakhs. The appellant will be liable to pay only the balance demand, after adjustment of the amount of ₹ 3,20,000/- and ₹ 2,11,857/- and any other payment if made. We further hold that in view of the Law clarified by the Hon ble Supreme Court in the case of Shree Bhagwati Steel Rolling Mills and others Vs. Commissioner of Central Excise 2015 (11) TMI 1172 - SUPREME COURT , the appellant is not liable to pay any interest and penalty. - Decided partly in favour of appellant

Summary

Issues:
- Discrepancy in fixing annual production capacity for two furnaces
- Liability to pay duty based on production capacity of one furnace
- Applicability of penalty and interest post the repeal of certain rules

Analysis:
1. The appellant, a manufacturer of M/s Ingots & Runners Risers, appealed against an Order-in-Appeal dated 19.07.2011 by the Commissioner (Appeals) of Central Excise, Kanpur. The appellant opted to discharge duty under Rule 96 ZO(3) of CER, 1944 but faced a demand for duty not paid. The Revenue alleged that the appellant cleared more material than declared, leading to a surplus lying unutilized. The appellant contended they should only pay duty for one furnace, not both, as stated in their option letter dated 26.8.1997.

2. The matter was remanded to the Commissioner by the Tribunal for a speaking order. The Jt. Commissioner re-fixed the duty liability considering an arithmetical mistake in the earlier order. The Commissioner's order was based on technical expert verification and observations regarding the operational status of the furnaces. The Jt. Commissioner upheld the duty liability, interest, and penalty based on the final APC fixed.

3. The appellant appealed to the Ld. Commissioner (Appeals), challenging the demand post the repeal of certain rules and alleging a non-speaking order. The appeal was initially dismissed due to non-deposit and non-prosecution but later restored by the Tribunal with a stay on the balance demand. The High Court directed the Tribunal to dispose of the appeal on merits within a specified timeframe.

4. The appellant's counsel withdrew representation, leading to an ex parte proceeding. The Revenue relied on a Supreme Court order regarding the enforcement of penalty and interest post the repeal of certain rules. The Tribunal found that the demand for two furnaces was erroneous, as the appellant had communicated the operation of only one furnace. Consequently, the appellant was held liable to pay duty for one furnace only, with no obligation for interest and penalty as per the Supreme Court ruling.

5. The Tribunal allowed the appeal in part, modifying the impugned order to reflect duty payment for one furnace and negating the imposition of interest and penalty. The decision was pronounced on 26.07.2016.