2005 (9) TMI 205 - AT - Central Excise

Issues Involved:

1. Validity of the demand of duty amounting to Rs. 67,500/- by the Commissioner (Appeals).
2. Whether the appellant was liable to pay duty for both cold rolling machines or only one.
3. Applicability of the Circulars dated 25-7-1997 regarding idle capacity.
4. Interpretation of Rule 96ZA and Rule 96ZB of the Central Excise Rules, 1944.

Detailed Analysis:

1. Validity of the demand of duty amounting to Rs. 67,500/- by the Commissioner (Appeals):

The appellant challenged the order of the Commissioner (Appeals) confirming the demand of duty amounting to Rs. 67,500/-. The adjudicating authority had previously dropped two show cause notices against the appellant, accepting the appellant's declaration that one of the machines was used for hot rolling only from 8-4-1999. However, the Commissioner (Appeals) reversed this decision and confirmed the duty demand.

2. Whether the appellant was liable to pay duty for both cold rolling machines or only one:

The appellant had submitted an application under Rule 96ZA to avail of the special procedure, declaring one cold rolling machine and paying duty at Rs. 7500/- per month. Upon purchasing another cold rolling machine, the appellant contended that one machine was used for hot rolling and the other for cold rolling, thus duty was payable for only one machine. The Department argued that duty was payable for both machines as both were installed and operational.

3. Applicability of the Circulars dated 25-7-1997 regarding idle capacity:

The appellant relied on Circular Nos. 325/41/97-CX. and 326/42/97-CX. to argue that the machine used for hot rolling should be treated as idle, and no duty should be charged. The Tribunal in previous cases had held that idle capacity should not be considered for duty determination. However, the Department contended that these circulars were inapplicable as they related to production capacity under different rules (96ZO and 96ZP).

4. Interpretation of Rule 96ZA and Rule 96ZB of the Central Excise Rules, 1944:

Under Rule 96ZA, the appellant opted for a special procedure for duty calculation based on the number of cold rolling machines installed. Rule 96ZB(2) required duty to be calculated based on the maximum number of cold rolling machines installed. The Tribunal held that once the appellant declared the machine as a cold rolling machine and paid duty accordingly, it could not later contend that the machine was used for hot rolling to avoid duty. The actual use of the machine was irrelevant under Rule 96ZB; duty was payable for each installed machine.

Conclusion:

The Commissioner (Appeals) correctly held that the cold rolling machine did not become a hot rolling machine merely by its use and that duty was to be levied based on the maximum number of installed cold rolling machines. The reliance on the circulars was misplaced as they were not applicable to the context of Rule 96ZA and 96ZB. The appeal was dismissed, confirming the duty demand of Rs. 67,500/-.

(Dictated in open Court on 30-9-2005)

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