2007 (7) TMI 323 - HC - Central Excise

Production capacity based duty - Held that - If the authorities after declaring particular product as notified goods proceeds to fix the annual production capacity of the factory it has to do so by giving proportionate increase if during the year under consideration for the purpose of fixation of annual production capacity the factory was closed for certain period manufacturer will be able to evade the duty by taking the production of six months to be the annual production capacity because factory was closed for six months during the year taken as standard for the purpose of determination of annual production capacity. We are afraid proviso relied upon by learned Counsel for the appellant does not come to the rescue of the appe1lant-assessee. On the contrary the same supports the department during the process of determination of annual production capacity. The benefit of proviso to sub section (3) and sub-section (4) of Section 3A of the Act is not available to the appellant herein if it has enjoyed benefit of payment of excise duty under procedure prescribed by Rule 96-ZP(3).Therefore no substantial question of law arises for our consideration.

Summary

Issues:
1. Dismissal of appeal by Customs, Excise and Service Tax Appellate Tribunal.
2. Determination of production capacity under Section 3A of the Central Excise Act, 1944.
3. Interpretation of Rule 96-ZP(3) of the Central Excise Rules, 1944.
4. Applicability of proviso to sub-section (3) and sub-section (4) of Section 3A regarding duty payment.

Analysis:

1. The appellant, a steel company, challenged the dismissal of its appeal by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) in the High Court of Bombay. The Tribunal, along with the Assessment Officer and Commissioner (Appeals), had ruled against the appellant.

2. The appellant, operating under Section 3A of the Central Excise Act, 1944, availed the facility of payment of excise duty based on its annual production capacity for notified goods. Due to market conditions, the factory was closed, leading to a demand notice for unpaid duty. The appellant argued for relief under Section 3A(2) of the Act.

3. The dispute involved the interpretation of Rule 96-ZP(3) of the Central Excise Rules, which outlined the procedure for manufacturers opting to pay duty based on annual production capacity. The rule specified conditions for payment and excluded benefits under certain provisions of Section 3A.

4. The Court analyzed the proviso to sub-section (3) and sub-section (4) of Section 3A concerning duty calculation and relaxation based on factory operations. It clarified that if a manufacturer followed Rule 96-ZP(3) for duty payment, the benefits of the mentioned provisions were not applicable, emphasizing the importance of compliance with the prescribed procedures.

5. The Court dismissed the appeal, concluding that no substantial question of law arose. It upheld the decision that the appellant, having utilized the payment scheme under Rule 96-ZP(3), was not entitled to the relaxations provided under Section 3A. The judgment highlighted the significance of following the specific rules and procedures governing excise duty payments.