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Challenge to Rule 96ZO(3) of Notification No. 27/97-Central Excise (N.T.) as illegal, arbitrary, unjust, void, and violative of Articles 14, 19(1)(g), and 21 of the Constitution of India. Levy of excise duty based on annual capacity of production due to power cuts affecting actual production. Interpretation of Section 3A of the Central Excise Act, 1944 regarding determination of excise duty based on production capacity. Analysis: Issue 1: Challenge to Rule 96ZO(3) of Notification No. 27/97-Central Excise (N.T.) The petitioners sought a writ of mandamus to declare Rule 96ZO(3) as illegal and violative of constitutional provisions. They argued that the change in policy by the Central Government to levy excise duty based on annual production capacity was unjust due to power cuts affecting their actual production levels. However, the court found that Section 3A of the Act provided a mechanism for reassessment of duty if actual production falls below the determined levels, offering a remedy within the statute itself. As such, the court dismissed the challenge to Rule 96ZO(3) and disposed of the petitions without further orders. Issue 2: Levy of excise duty based on annual capacity of production The petitioners, engaged in manufacturing Mild Steel ingots, faced difficulties in reaching their optimum production levels due to power cuts. The Central Government's notification under Section 3A of the Act allowed for the levy of excise duty based on annual production capacity. The petitioners argued that power cuts hindered their production, impacting their ability to utilize the full capacity of their furnaces. The court noted the impact of power as a raw material on production but emphasized that the statute provided for reassessment of duty if actual production was lower than determined levels, offering a remedy to address such situations. Issue 3: Interpretation of Section 3A of the Central Excise Act, 1944 The court analyzed Section 3A, which empowered the Central Government to charge excise duty based on the capacity of production for notified goods. The provision allowed for the determination of annual production capacity by the Commissioner of Central Excise and specified the levy and collection of duty on notified goods. Additionally, it provided for reassessment of duty if actual production differed from the determined levels. The court highlighted the availability of relief within the statute itself through reassessment mechanisms outlined in sub-sections (4) and (5) of Section 3A, dismissing the petitioners' contentions against the levy of excise duty based on production capacity. In conclusion, the court upheld the validity of the statutory provisions, emphasizing the availability of relief mechanisms within the law for situations where actual production falls below determined levels. The judgment clarified the application of Section 3A of the Central Excise Act, 1944 in cases where external factors like power cuts impact production capacities, providing a legal framework for reassessment of excise duty in such circumstances.
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