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2008 (4) TMI 327 - HC - Central ExciseWhat is the scope of Rule 3 4 and 5 of the HRRSMACD Rules 1997 in case of fixation of annual capacity of production in view of the change of parameters to be effected by the manufacturers? Whether the Tribunal was right in holding that Rule 5 of the HRRSMACD Rules 1997 is not the relevant clause for determination of annual capacity of production where there was a change in the parameters and that it was only Rule 4 which was relevant rule in determining the annual capacity of production when Rule 5 does not exclude Ihe cases of re-determination in case of change in parameters by applying Rule 4 of the said Rules? Held that - No hesitation to answer question no. 1 in favour of the respondent and against the Revenue when change of machinery and parameters leads to reduction of annual capacity Rule 5 would not apply meaning thereby that Rule 4 of the aforesaid Rules only shall have application to the facts of the case. We have to decide the question no. 2 also in favour of the respondent and against the appellant-revenue. Once the power vested with the Central Government under Section 3A of the Central Excise Act 1944 which enures it to frame Rules has been taken away by omission of the said Section it will have no competence or jurisdiction or power to frame Rules.
Issues:
1. Interpretation of Rule 3, 4, and 5 of the HRRSMACD Rules, 1997 for annual capacity determination. 2. Relevance of Rule 5 in determining annual capacity production. 3. Impact of the omission of Section 3A of the Central Excise Act, 1944 on related Rules. Issue 1: Interpretation of HRRSMACD Rules for annual capacity determination: The case involved a reference by the Customs and Central Excise Gold Control Appellate Tribunal (CEGAT) regarding the interpretation of Rules 3, 4, and 5 of the HRRSMACD Rules, 1997 for annual capacity determination. The respondent, a steel rolling mill, applied for a revision of its annual production capacity due to the installation of new machinery and parameter changes. The Commissioner initially refused to approve the reduction in capacity citing Rule 5 of the HRRSMACD Rules, 1997. However, CEGAT set aside the Commissioner's order, emphasizing that Rule 4 was the relevant rule for determining annual capacity, especially in cases of reduced capacity due to machinery changes. The High Court upheld this interpretation, stating that Rule 5 does not apply when machinery changes lead to a decrease in annual capacity. Issue 2: Relevance of Rule 5 in determining annual capacity production: The Tribunal's decision was based on previous judgments that clarified Rule 5's applicability in cases where machinery changes result in reduced production capacity. The High Court concurred with this interpretation, emphasizing that Rule 5 does not apply when machinery changes lead to a decrease in annual capacity. The Court held that Rule 4 was the appropriate rule to determine annual capacity in such scenarios, as highlighted in the case of the respondent's steel rolling mill. Issue 3: Impact of the omission of Section 3A on related Rules: The respondent argued that the omission of Section 3A of the Central Excise Act, 1944, by the Finance Act 2001, rendered related Rules, including the HRRSMACD Rules, without any legal standing. Citing various Supreme Court judgments, the respondent contended that the power to frame Rules was derived from Section 3A, and its omission invalidated the Rules. The High Court agreed, stating that once the statutory provision empowering Rule-making was omitted, the Rules would also become inoperative. The Court relied on established legal principles and Supreme Court precedents to support its decision, ultimately ruling in favor of the respondent on both questions raised. This comprehensive analysis of the judgment highlights the interpretation of the HRRSMACD Rules, the relevance of specific rules in determining annual production capacity, and the impact of statutory omissions on related Rules, providing a detailed insight into the legal reasoning and conclusions reached by the High Court.
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