2009 (1) TMI 282 - HC - Central Excise

Whether the excise duty on goods not actually manufactured can be levied and collected Under Rule 96ZO of the Central Excise Rules 1944 when the duty is levied under Section 3 of the Central Excise Act 1944 on the goods produced or manufactured? Whether duty of excise can be levied and collected simply on account of failure of Applicant to strictly comply procedural requirement? Held that - In the instant case it has not been disputed that the unit was lying closed. The Range staff has visited the unit and confirmed the closure on 17-1-1998 which was in response to the intimation given by the petitioner on 16-1-1998. The meter reading has been noted by the Range staff which is evident from the reading of their note dated 17-1-1998. The reading noted by the Range staff is 799370 KWH on 17-1-1998. On 19-1-1998 the Assessee had also intimated the meter reading to be 799365 KWH as on 16-1-1998. When the aforesaid reading is compared with the reading intimated by the petitioner on 19-1-1998 as on 16-1-1998 at 18 hours the unit is shown to have consumed only five units. It is not possible to contemplate that with five units the petitioner could have indulged in any production. There was no question of any production and consequently no duty could be imposed. Therefore the answer to the questions posed has to be in favour of the Assessee-petitioner.

Summary

The High Court of Punjab & Haryana at Chandigarh issued a judgment on a petition filed under Section 35 H(1) of the Central Excise Act, 1944. The court directed the Customs, Excise and Service Tax Appellate Tribunal to refer questions of law for determination. The questions related to the levying and collection of excise duty on goods not actually manufactured under Rule 96ZO of the Central Excise Rules, 1944, and whether excise duty can be imposed due to a failure to comply with procedural requirements. The court referred to previous cases where similar questions were answered in favor of the Assessee.

The controversy involved the petitioner, engaged in manufacturing steel ingots and and steel casting, under the 'Compounded Levy Scheme'. The petitioner claimed abatement of duty under Rule 96ZO(2) after closing the factory for more than 7 days. The abatement claim was rejected due to a delay in intimating the electricity meter reading, despite other conditions being met. The Tribunal upheld the rejection, citing non-compliance with Rule 96ZO(2)(b).

The court found the rejection of the abatement claim for the petitioner's minor lapse to be unsustainable. Duty could only be levied on goods produced or manufactured, and since the unit was closed with minimal electricity consumption, no production occurred, and no duty was due. The court ruled in favor of the Assessee, citing previous judgments supporting this interpretation. The matter was disposed of accordingly.