2009 (7) TMI 319 - AT - Central Excise

Production capacity based duty - determination of their annual capacity of production - appellant had produced the invoice for modification of the furnace - Commissioner while passing the impugned order after taking into consideration the provisions of Rule 3 of Induction Furnace Annual Capacity Determination Rules 1997 has observed that the relevant rule mandates the party to produce authentic copy of the manufacturer s/trader s invoice who had supplied or installed the furnace or crucible to the induction furnace unit and not the invoice relating to modifications carried out in the furnace or crucible - Undisputedly the appellant has not followed the procedure as prescribed under Rule 4. The invoice or certificate of modified capacity of the furnace cannot be the substitute for the document in relation to the capacity of the furnace at an initial stage when the furnace was originally installed/supplied. Being so a document regarding the change of capacity of furnace cannot be within the meaning of the expression any other material under sub-rule (2) of Rule 3 of the said rule. Considering the same as rightly pointed out on behalf of the respondent no fault can be found with the impugned order of Commissioner discarding the invoice relating to modified capacity to determine the original capacity of the furnace in terms of Rule 3 of the said rule.

Summary

Issues Involved:
1. Determination of Annual Production Capacity (APC) of the induction furnace.
2. Validity of the invoice for modification of the furnace capacity.
3. Compliance with Rule 3 and Rule 4 of the Induction Furnace Annual Capacity Determination Rules, 1997.

Issue-wise Detailed Analysis:

1. Determination of Annual Production Capacity (APC) of the induction furnace:
The appellants are engaged in the production and clearance of M.S. Ingots of non-alloy steel using an induction furnace. Initially, the APC was determined as 36131.20 MT based on the appellant's declaration and subsequent verification. The appellant declared two furnaces of 3.5 MT and 2.00 MT capacities and opted to avail benefits under Rule 96ZQ(3). Later, the appellant informed the closure of the 2.00 MT furnace and requested a re-determination of APC. The Commissioner re-determined the APC for the period from 2-2-99 onwards as 11200 MT and 6400 MT but did not accept the closure claim. The Tribunal remanded the matter for re-examination, and the Commissioner reiterated the previous order, fixing the APC for the financial year 1999-2000 as 12915.2 MT.

2. Validity of the invoice for modification of the furnace capacity:
The appellant produced an invoice and certificate for the modified furnace capacity. The Tribunal directed the Commissioner to examine the invoice issued by the manufacturer/trader about the furnace's capacity in light of Rule 3. The Commissioner observed that Rule 3 mandates producing an authenticated copy of the manufacturer's/trader's invoice for the furnace's original installation, not for modifications. The Commissioner found the appellant failed to provide the required evidence for the original capacity, and the invoice produced was for modification charges, which was not considered valid for determining the furnace capacity.

3. Compliance with Rule 3 and Rule 4 of the Induction Furnace Annual Capacity Determination Rules, 1997:
Rule 3 prescribes the manner for ascertaining the APC based on the manufacturer's/trader's invoice at the time of furnace installation. Sub-rule (2) allows for other materials if the original invoice is unavailable, but it must relate to the furnace's original installation, not modifications. Rule 4 outlines the procedure for changes in furnace capacity, requiring prior intimation and approval from the Commissioner. The appellant did not follow this procedure, and the Commissioner correctly determined the APC based on the original installation documents. The Tribunal upheld the Commissioner's interpretation and application of Rules 3 and 4, dismissing the appeal.

Conclusion:
The Tribunal found no fault with the Commissioner's order, which adhered to the prescribed rules for determining the APC based on the original installation documents and not on modification invoices. The appellant's failure to follow the proper procedure under Rule 4 and provide the necessary evidence led to the dismissal of the appeal.