2009 (1) TMI 287 - HC - Central Excise

Production capacity based duty - whether the duty collected was without the authority of law and liable to be refunded? - Held that - It appears that the appellant has opted under Rule 963Q for the payment of excise duty on the basis of annual production capacity to be determined by the Commissioner under Section 3A of the Act. The Commissioner Central Excise determined the annual production capacity vide order dated 29th March, 1999 including the galleries. It appears that the appellant has not accepted such determination and has paid the duty under protest. It is admitted that against the order dated 29th March, 1999, the appellant has not filed any appeal, but from the subsequent correspondences referred herein above. It appears that the appellant was disputing the demand of duty on stenter galleries and has treated the said order of the Commissioner as interlocutory order subject to final decision on the verification of the technical expert. According to the appellant, no final order has been passed. It also appears that the appellant has filed fresh declaration referred hereinabove and vide letter dated 25th September, 2000 claimed re-determination on the basis of amendment in the Rule by Notification No. 14 of 2000, dated 1st March, 2000 and the decision by the Tribunal in the case of Chiman Lal Silk Mill (P) v. Commissioner of Central Excise, (2000 (3) TMI 98 - CEGAT, CHENNAI), but these aspects of the matter have not been considered by the Tribunal, which according to us are relevant to adjudicate the issue. Appeal is allowed. The impugned order of the Tribunal dated 3rd June, 2008 is set aside and the matter is remanded back to the Tribunal to decide the appeal afresh in accordance to the law in the light of the observations made above

Summary

Issues Involved:
1. Fixation of annual production capacity.
2. Inclusion of stenter galleries in the production capacity.
3. Payment of duty under protest.
4. Refund claim and its rejection.
5. Applicability of Supreme Court decisions.
6. Finality of the Commissioner's order.
7. Tribunal's consideration of relevant aspects.

Issue-wise Detailed Analysis:

1. Fixation of Annual Production Capacity:
The appellant was engaged in the processing of man-made compounded fabrics and paid duty under Section 3A of the Central Excise Act. The Commissioner of Central Excise, Kanpur, initially fixed the annual production capacity provisionally and later finalized it, including the gallery for stenter no. 1, 2, 3, and 4. The appellant did not dispute this fixation initially and paid the duty under protest.

2. Inclusion of Stenter Galleries in the Production Capacity:
The appellant filed a refund claim arguing that stenter galleries should not be included in the production capacity as per Explanation -1 of Rule 5 of the Hot Air Stenter Independent Textile Processor Annual Capacity Determination Rules, 1998. The Commissioner's order including galleries was not appealed initially but was contested later through a refund claim.

3. Payment of Duty Under Protest:
The appellant paid the duty under protest and communicated this through a letter dated 22nd April 1999. The appellant argued that the duty on stenter galleries was always disputed and paid under protest, seeking a final order on the verification of the technical expert.

4. Refund Claim and Its Rejection:
The refund claim filed by the appellant was rejected by the Deputy Commissioner of Central Excise on the basis that the appellant did not challenge the Commissioner's order fixing the annual production capacity, and the duty was paid as per that order. The rejection was supported by the decision of the Supreme Court in Collector of Central Excise, Kanpur v. Flock (India) Pvt. Ltd.

5. Applicability of Supreme Court Decisions:
The appellant relied on the Supreme Court decision in Commissioner of Central Excise, Jaipur-II v. SPBL Ltd., which held that galleries were to be excluded while determining production capacity. The Tribunal, however, relied on the decision in Collector of Central Excise, Kanpur v. Flock (India) Pvt. Ltd., which stated that an order not appealed cannot be challenged in a refund proceeding.

6. Finality of the Commissioner's Order:
The appellant contended that the Commissioner's order dated 29th March 1999 was not final as the duty on stenter galleries was paid under protest and was subject to further adjudication. The Tribunal did not consider this aspect, leading to the appellant's argument that the order was interlocutory and not final.

7. Tribunal's Consideration of Relevant Aspects:
The Tribunal did not consider the appellant's argument regarding the protest and the need for re-determination based on the amended rules and the Supreme Court's decision. The High Court observed that the Tribunal failed to address these relevant aspects, necessitating a reconsideration of the matter.

Conclusion:
The High Court allowed the appeal, setting aside the Tribunal's order dated 3rd June 2008, and remanded the matter back to the Tribunal for fresh consideration in light of the observations made, various Supreme Court decisions, and the relevant provisions of law. The High Court emphasized the need for the Tribunal to consider whether the Commissioner's order was final and the implications of the appellant paying duty under protest.