2002 (2) TMI 252 - AT - Central Excise

Summary

Issues:
1. Duty liability after factory closure and applicability of Section 3A(2) proviso.
2. Interpretation of Hot Re-Rolling Steel Mills Annual Capacity Determination Rules, 1997.

Issue 1: Duty liability after factory closure and applicability of Section 3A(2) proviso:
The appellant, a manufacturer of hot re-rolled steel products, closed their factory permanently and ceased operations, leading to a dispute regarding the duty liability for the period post-closure. The appellant contended that as per the proviso to sub-section (2) of Section 3A of the Central Excise Act, 1944, they were not liable to pay duty for the period from December, 1997 to March, 1998, following the factory closure in December 1997. However, show cause notices were issued demanding duty for the said period. The Assistant Commissioner confirmed a partial duty amount for the period up to the factory closure date. The appeal before the Commissioner (A) resulted in the Revenue's appeal being allowed, with the Commissioner holding that the proviso to Section 3A(2) did not apply to the appellant's case for revising the Annual Capacity of Production (ACP) after closure. The Tribunal observed that the benefit of abatement from duty payment during the closure period was indeed available to the appellants under Section 3A(2), thereby allowing the appeal and setting aside the Commissioner (A)'s order.

Issue 2: Interpretation of Hot Re-Rolling Steel Mills Annual Capacity Determination Rules, 1997:
The determination of the annual capacity of production for the appellant's unit was crucial in assessing the duty liability. The ACP was calculated based on the Hot Re-Rolling Steel Mills Annual Capacity Determination Rules, 1997. Rule 3 of these Rules outlined the formula for calculating the ACP based on the measurements of the re-rolling mills' components used by the assessee. Rule 4(1) further specified that any production capacity for a part of the year or changes in the total capacity should be calculated proportionately based on the ACP determined under Rule 3. The Tribunal noted that there was no provision in the rules to determine the production capacity based on the preceding year's facts. The lower appellate authority's decision was critiqued for not providing any legal basis for linking the closure benefit in one year to the ACP determination for the following year. The Tribunal highlighted that the judgment cited by the Commissioner (A) was not directly relevant to the proviso under Section 3A(2) and emphasized that the benefit of abatement during the closure period applied to the appellants. Consequently, the Tribunal allowed the appeal, emphasizing the correct interpretation of the rules and statutory provisions in determining duty liability post-factory closure.