2010 (2) TMI 423 - HC - Central Excise

Production capacity based duty - Whether in view of the facts of the case and Hon ble Supreme Court s ruling Channy Enterprises v. Commissioner of Central Excise, Chandigarh 2008 -TMI - 47276 - SUPREME COURT OF INDIA the annual capacity of the party is to be fixed by taking into consideration both the Rolling Mills having two burners/heating furnaces or not? Held that- annual capacity of rolling mills is to be fifed which has higher capacity and there is no clubbing of capacity of both the rolling mills.

Summary

Issues: Determination of annual capacity for duty calculation based on the number of furnaces in a manufacturing unit.

Analysis:
1. Issue of Determining Annual Capacity: The case involves a dispute regarding the determination of the annual capacity of a manufacturing unit for the purpose of duty calculation. The respondent, engaged in the manufacture of Hot Rolled Products, was operating two rolling mills with one furnace. The Adjudicating Authority initially determined the capacity based on the mill with higher parameters. Subsequently, the Commissioner calculated the annual capacity as 10594.508 MT considering both mills. However, the Appellate Tribunal allowed the respondent's appeal, stating that as there was only one furnace, the duty should be based on the actual production of the higher capacity mill.

2. Contentions of the Revenue: The revenue contended that the Tribunal's finding, based on the presence of only one furnace, was incorrect. The revenue argued that there were actually two furnaces, and therefore, duty should be calculated by considering both mills. The revenue emphasized that the report indicated the presence of a furnace with two melting zones and 11 doors, implying the capacity to heat two types of rolling material simultaneously.

3. Contentions of the Assessee: The assessee maintained that there was only one furnace operating both rolling mills. The assessee referred to the revenue's own statement, highlighting the presence of a single furnace capable of operating two mills simultaneously. The assessee relied on the fact that the scheme operated based on the capacity of the rolling mills, not the actual production, as established in a previous Supreme Court ruling.

4. Application of Legal Precedent: The judgment referred to a Supreme Court ruling in Channy Enterprises v. Commissioner of Central Excise, Chandigarh, which emphasized that if each rolling mill had a separate heating furnace, the unit's capacity would be the sum of each mill's capacity. However, as there was only one furnace in the present case, the capacity of the higher capacity mill should be considered for duty calculation.

5. Conclusion: The court determined that since there was only one furnace in operation, the duty calculation should be based on the higher capacity mill. Consequently, the appeal was dismissed, ruling in favor of the respondent and rejecting the revenue's argument for clubbing the capacities of both rolling mills. The judgment clarified that the presence of a single furnace dictated the method of determining the annual capacity for duty payment.