2002 (4) TMI 104 - AT - Central Excise

Demand and Recovery under Compounded Levy Scheme - Tax administration - Production capacity based duty

Summary

Issues Involved:
1. Applicability of Section 11A of the Central Excise Act for recovery of duty under the compounded levy scheme.
2. Correctness of capacity determination by the Commissioner under the Hot Re-rolling Steel Mills Annual Capacity Determination Rules, 1997.

Issue-wise Detailed Analysis:

1. Applicability of Section 11A of the Central Excise Act for recovery of duty under the compounded levy scheme:

The appellants, Hot Re-rolling Steel Mills, were discharging their Central Excise duty liability at compounded rates based on their production capacity as per Section 3A of the Central Excise Act. They argued that the recovery of duties should follow the procedure under Section 11A of the Central Excise Act, which mandates issuing a notice and considering representations before determining the duty amount. They contended that the demands were time-barred as recovery proceedings were not initiated within the time limits prescribed by Section 11A.

The Revenue countered that the compounded levy scheme is a separate scheme with its own machinery provisions, and the general provisions of Section 11A do not apply. The Apex Court's decisions in cases like Commissioner of C. Ex. & Customs v. Venus Castings (P) Ltd. and Union of India v. Supreme Steels and General Mills established that the compounded levy scheme is distinct, and the assessees are bound by the terms of that scheme.

The Tribunal, referring to the Apex Court's judgment in Raghuvar (India) Ltd., concluded that Section 11A is not an omnibus provision for all actions under the Central Excise Act. The compounded levy scheme for Hot Re-rolling Steel Mills is a separate scheme, and recoveries under this scheme are not subject to the time limits prescribed under Section 11A. The Tribunal overruled the contrary view taken by a Division Bench and held that the appellants must discharge their duty liability as determined by the Commissioner, and the Revenue can recover unpaid amounts under Section 11 of the Central Excise Act.

2. Correctness of capacity determination by the Commissioner under the Hot Re-rolling Steel Mills Annual Capacity Determination Rules, 1997:

Several appellants challenged the capacity determination by the Commissioner, arguing that it was based on actual production of the previous year, which is not applicable when there are changes in machinery. They cited the Larger Bench decision in Sawanmal Shibumal Steel Rolling Mills v. CCE, Chandigarh-I, which clarified the scope of Rule 5 of the Hot Re-rolling Steel Mills Annual Capacity Determination Rules, 1997.

The Tribunal acknowledged that the capacity determination should be based on the machinery installed in the premises of each manufacturer, not on parameters of other manufacturers. Therefore, the Tribunal ordered that the annual capacity of production and the duty amount due for the appellants mentioned in Para 10 be re-determined by the Commissioner, giving the appellants an opportunity to present their case. The rest of the appeals were rejected.

Conclusion:

The Tribunal concluded that the compounded levy scheme operates independently of the general provisions of Section 11A, and recoveries under this scheme are not time-barred by Section 11A. The Tribunal also directed re-determination of capacity and duty for specific appellants based on the machinery installed in their premises, ensuring fair assessment according to the applicable rules. The reference and the appeals were disposed of accordingly.