2018 (1) TMI 1161 - AT - Central Excise

Valuation - processing of Cotton Fabrics and Man-Made Knitted Fabrics - annual capacity based production - inclusion or exclusion of length of gallery/closed while re-determining the Annual Capacity Production - Held that - The contention of the appellant that the determination of actual production was done as per their statutory right under sub-section (4) of Section 3A and not in terms of option exercised by them is complete misreading of clauses of Section 3A and aforesaid notification. The said notification has been issued under sub-section (3) of Section 3A to specify the rate of duty. Accordingly, the rates of duty have been specified. The notification envisages two situations wherein the processor who wants to retain option of re-determination of duty or forgoes the re-determination of duty payable on the basis of actual production. Hence, the notification is to be read in conjunction along with Section 3A and not in competition with any sub-section of 3A. Since the appellant vide their declaration dt.3.4.2000 had retained their option for re-determination of duty payable on the basis of actual production, the adjudicating authority has correctly upheld the demand - demand of duty upheld. Liability of interest - appellant were a sick company under BIFR - Held that - since the appellant were a sick company, the interest liability cannot be imposed on the appellant. Appeal allowed in part.

Summary

Issues Involved:
1. Inclusion of gallery length in determining annual capacity of production.
2. Re-determination of duty liability based on actual production.
3. Applicability of interest on duty liability for a sick company under BIFR.

Issue-wise Detailed Analysis:

1. Inclusion of Gallery Length in Determining Annual Capacity of Production:
The appellant contested the inclusion of the gallery length in determining the annual capacity of production. Initially, the jurisdictional Commissioner included the gallery length, resulting in a recalculated duty liability. However, upon appeal, the Tribunal remanded the matter back, allowing the appellant to present evidence against the inclusion of gallery length. The Commissioner later ruled that the length of galleries was not includible, fixing the duty at ?7,50,000/- per chamber per month from 16.12.1998 onwards.

2. Re-determination of Duty Liability Based on Actual Production:
The Tribunal noted that the Commissioner did not consider the appellant's request for re-determining duty liability under Section 3A(4) based on actual production. The Tribunal emphasized that the Commissioner should have considered this request, as there is a provision in Section 3A(4) for such re-determination. Consequently, the case was remanded to the Commissioner to re-determine the duty liability based on actual production. The Commissioner, upon re-determination, calculated the duty payable as ?1,45,80,266/- for the period from 16.12.1998 to February 2001, considering the appellant's actual production data.

3. Applicability of Interest on Duty Liability for a Sick Company under BIFR:
The appellant argued that as a sick company under BIFR, they should not be liable for interest on the duty amount. They relied on precedents where interest was not imposed on companies declared sick by BIFR. The Tribunal agreed with this argument, citing the overriding provisions of Section 22 of the Sick Industrial and Financial Reconstruction Act, which protect sick companies from such liabilities. Consequently, the interest imposed on the appellant was dropped.

Conclusion:
The Tribunal upheld the duty demand of ?1,45,80,266/- as determined by the adjudicating authority but dropped the interest liability, acknowledging the appellant's status as a sick company under BIFR. The appeal was disposed of accordingly.