2019 (2) TMI 842 - AT - Central Excise

Valuation - Compounded Levy Scheme - Annual Capacity of Production - section 3A of the Central Excise, Act, 1944 - demand of differential duty - Held that - Government notified the Scheme of Compounded Levy Scheme under Section 3A for induction of furnace units as well as re-rolling mills w.e.f. 1/09/1997. In terms of this scheme, the Annual Capacity of Production is required to be fixed by the Jurisdictional Commissioner and the assesses were required to dis-charge their duty liabilities in terms of such production capacity fixed. In those cases, where the assesses are of the view that the ACP fixed in terms of the scheme is unreasonably high and the Actual Production is far lower, Section 3A (4) provides for the assessee to file an application to the Commissioner for re-fixing the ACP. Such application was moved by the appellant through their letter dated 15/07/1998 against the capacities fixed by the Commissioner vide this order dated 28/4/1998. The present proceedings is against the order passed by Commissioner in the denovo proceedings. However, it is seen that he has re-fix the capacity as done in his initial order dated 28/04/1998. He has declined to consider the plea made by the appellant to re-fixe the capacity keeping in view of the actual production figures recorded in RG-1. After considering the various factors claimed to be impacting production of both ingots as well as the rolled products, we are of the view that the fixing of Annual Capacity of Production simply on the basis of the formula will be unfair to the appellant. As such, the capacity is required to be re-determined as per the provisions of Section 3A (4) - The Commissioner is required to re-fix the capacity of production after considering the evidence produced by the assessee in support of his claim for lower production- appeal allowed by way of remand.

Issues:
1. Determination of Annual Capacity of Production (ACP) for Induction Furnace and Re-rolling Mill under Central Excise Rules.
2. Application for re-determination of ACP by the appellant.
3. Justification of the Commissioner's order in re-fixing the ACP.
4. Arguments presented by the appellant and the Department.
5. Consideration of actual production capacity and relevant evidence.
6. Application of Section 3A(4) for re-determination of ACP.
7. Decision on re-fixing ACP for the Induction Furnace and Re-rolling Mill.
8. Remand of the issue for working out the differential duty.
9. Clarification on payment of interest and penalty.

Analysis:

1. The case involved the determination of the Annual Capacity of Production (ACP) for an Induction Furnace and Re-rolling Mill under the Central Excise Rules. The Jurisdictional Commissioner had initially fixed the ACP, which was challenged by the appellant through an application for re-determination.

2. The appellant submitted an application for re-determination of the ACP based on factors affecting actual production capacity, such as unreliable power supply, capacity constraints, and difficulties in selling the products. The appellant claimed that the ACP fixed by the Commissioner was higher than the actual production capacity.

3. The Commissioner re-fixed the ACP without considering the appellant's request for re-fixing based on actual production figures. The appellant argued that the ACP should be re-determined considering the actual production recorded in RG-1, as per Section 3A(4) of the Act.

4. The appellant's arguments were centered around the failure of the Lower Authorities to acknowledge the difficulties affecting production capacity and the need to re-fix the ACP based on actual production. The Department justified the Commissioner's orders, stating that the appellant did not provide sufficient evidence to support their claim.

5. The Tribunal considered the appellant's application outlining reasons for the lower production capacity, including power supply issues and capacity constraints. The Tribunal emphasized the importance of re-determining the ACP based on actual production evidence and the provisions of Section 3A(4).

6. Section 3A(4) allowed the assessee to file an application for re-fixing the ACP if the actual production was lower than the capacity determined under Section 3A(2). The Tribunal highlighted the need for the Commissioner to re-fix the production capacity after considering evidence presented by the assessee.

7. After careful consideration, the Tribunal re-determined the ACP at 1/3rd capacity for the Induction Furnace and 2/3rd capacity for the Re-rolling Mill based on the constraints faced by the appellant. The ACP was set at 1211MT and 1544MT for the Induction Furnace and Re-rolling Mill, respectively.

8. The issue of differential duty payment was remanded to the Jurisdictional Assistant Commissioner for recalculating based on the revised ACP. The Tribunal clarified that only the differential duty was payable, and interest and penalty were not applicable based on a Supreme Court decision.

9. The appeals were disposed of with the decision to re-fix the ACP based on actual production capacity and the remand of the issue for recalculating the differential duty, excluding interest and penalty as per the Supreme Court ruling.

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