2018 (5) TMI 109 - HC - Central Excise

Levy of duty - M.S. Ingots/billets - Section 3 of the Central Excise Act, 1944 read with Notification No. 30/97-C.E. (N.T.), dated 1-8-1997 - Held that - From the perusal of Section 38A(c) it is evident that it shall not affect right, privilege, obligation or liability acquired, accrued or incurred under any rule, notification or order so amended or repealed, superseded or rescinded. Admittedly, the liability in the instant case pertains to the period from 1-10-1999 to 31-3-2000. Section 3A of the Act was omitted on 11-5-2001. Thus, during the period of liability of the appellant, Section 3A of the Act was in existence. Therefore, in view of the Section 38A(c) of the Act, liability of the appellant, which was acquired during the period for which charging section as well as Rules were in vogue, cannot be wiped out. Annual production capacity of the furnaces - Held that - annual production capacity of the furnaces of the appellant has been carried out in terms of Rule 3(2) of the Rules with the help of technical expert and after physical measurement of the furnaces, order dated 9-3-1998 was passed. The aforesaid order was upheld by the Tribunal and it has been held by the Tribunal that in case of the closure of the furnaces for continuation but not less than seven days as per paragraph 6(3) of the instructions, the appellant shall be entitled to abatement in the duty. In case the furnaces of the appellant were not functional, the appellant would be entitled to seek abatement of the duty from the authorities. Appeal dismissed.

Summary

Issues Involved:
1. Validity of Rule 96ZO(3) of the Central Excise Rules, 1944, and Section 3A of the Central Excise Act, 1944.
2. Determination of annual capacity of production.
3. Effect of omission of Section 3A and Rule 96ZO on liability.
4. Applicability of Section 38A of the Central Excise Act.
5. Parity in treatment with other similar cases.
6. Relevance of sanctioned electric load in determining furnace capacity.
7. Entitlement to abatement of duty.

Detailed Analysis:

1. Validity of Rule 96ZO(3) and Section 3A:
The appellant challenged the constitutionality of Rule 96ZO(3) and Section 3A. The learned Single Judge upheld the validity of these provisions, relying on Supreme Court decisions in *Commissioner of Central Excise and Customs v. Venus Castings (P) Ltd.* and *Supreme Steels and General Mills and Others*. Consequently, the writ petition was dismissed.

2. Determination of Annual Capacity of Production:
The appellant's annual production capacity was assessed by the Commissioner of Central Excise as 22400 MT with effect from 1-10-1999, based on Rule 3 of the Induction Furnace Annual Capacity Determination Rules, 1997. This determination was upheld by the Tribunal. The learned Single Judge stated that the capacity should be calculated on a pro-rata basis and that the sealing or unsealing of furnaces was for claiming duty abatement, not for determining annual capacity.

3. Effect of Omission of Section 3A and Rule 96ZO on Liability:
The appellant argued that since Section 3A and Rule 96ZO were omitted, no proceedings for recovery could be initiated post-omission. However, the court held that the liability accrued during the period these provisions were in force and could not be nullified by their subsequent omission. This stance was supported by Section 38A of the Act, which preserves liabilities despite the repeal of provisions.

4. Applicability of Section 38A:
Section 38A, inserted by the Finance Act, 2001, ensures that the repeal or amendment of any rule or notification does not affect any liability or proceeding already initiated. The court referred to Supreme Court rulings in *M/s. Fibre Board (P) Ltd.* and *M/s. Bhagwati Steel Rolling Mills*, which clarified that omission is equivalent to repeal, thus preserving accrued liabilities.

5. Parity in Treatment with Other Cases:
The appellant sought similar treatment as Yumna Alloys, whose capacity was determined at 4 MT. The court rejected this claim, stating that negative equality cannot be claimed, and any wrongful benefit granted to another party does not entitle the appellant to the same.

6. Relevance of Sanctioned Electric Load:
The appellant argued that the sanctioned electric load of 2 MVA made it impossible to run two furnaces simultaneously. The court noted that the furnace capacity was assessed based on installed capacity as per the prescribed formula, and the sanctioned load was not a factor in dispute.

7. Entitlement to Abatement of Duty:
The appellant could seek abatement for periods when the furnaces were non-operational for not less than seven days. This was in line with the Tribunal's decision, which allowed for duty abatement under specific conditions.

Conclusion:
The court dismissed the appeal, affirming that the liability accrued under the provisions in force at the relevant time could not be nullified by their subsequent omission. The determination of production capacity and the applicability of Section 38A were upheld, and the appellant's claims for parity and reassessment of furnace capacity were rejected.