2010 (7) TMI 219 - HC - Central Excise

Assesse had opted for Compounded Levy Scheme and declared installed crucibles of capacities of 2MT and 2.5MT. Commissioner determined annual capacity of 14400MT. Excise Officer found 4 crucibles of capacities of 2MT, 2.5MT, 3MT and 4MT during his visit at night. Commissioner revised the annual capacity to 22400MT and demanded additional duty of Rs. 92 Lacs, interest and equal amount of penalty. Tribunal upheld the commissioner s order. Assessee contended that crucibles of 3MT and 4 MT were kept as spare and assessing officer could not recover the duty after 6 months. Hob ble high court rejected these contentions. High court upheld the decision of the Tribunal.

Summary

Issues:
1. Determination of annual production capacity based on installed crucibles.
2. Application of Section 11A of the Central Excise Act for duty recovery.

Issue 1: Determination of annual production capacity based on installed crucibles

The appellant filed an appeal under Section 35(G) of the Central Excise Act against an order passed by the Customs Excise and Service Tax Appellate Tribunal. The dispute revolved around the determination of the appellant's annual production capacity. The appellant, engaged in manufacturing non-alloy steel ingots, opted for the Compounded Levy Scheme. The Commissioner determined their production capacity as 14400MT based on crucibles of 2MT and 2.5MT capacity. However, during an investigation, it was found that the appellant had installed crucibles of higher capacities (3MT and 4MT) before the scheme's commencement. The appellant argued that the higher capacity crucibles were used sparingly as standby, achieving increased production through minor modifications. The Commissioner enhanced the capacity to 22400MT based on the higher capacity crucibles and imposed additional duty, penalties, and confiscation orders. The Tribunal upheld the Commissioner's decision, leading to the appellant's appeal.

Issue 1 Analysis:

The Tribunal found that the appellant had indeed installed crucibles of 2MT, 2.5MT, 3MT, and 4MT capacities before the scheme's initiation, contrary to the appellant's claim of using only lower capacity crucibles. The Tribunal rejected the appellant's argument that they increased production by modifying the lower capacity crucibles. The Tribunal concluded that the evidence supported the Commissioner's decision to enhance the annual production capacity based on the higher capacity crucibles. The Tribunal's decision was based on the quantum of production as per log sheets and electricity consumption, indicating the use of higher capacity crucibles. The Tribunal's findings were deemed reasonable and not open to challenge, as no substantial question of law arose.

Issue 2: Application of Section 11A of the Central Excise Act for duty recovery

The appellant contended that the recovery of duty under Section 11A of the Act was time-barred, as it exceeded the six-month limitation period. The appellant cited various Supreme Court judgments to support their argument. However, the Tribunal rejected this contention on two grounds. Firstly, the appellant did not raise this point before the Tribunal. Secondly, the extended limitation period of 5 years under Section 11A applies in cases of intentional suppression of material information. Since the appellant did not disclose the installation and use of higher capacity crucibles, the extended limitation period was applicable. The Tribunal dismissed the appellant's argument, stating that the cited judgments did not apply to the present case.

Issue 2 Analysis:

The Tribunal dismissed the appellant's argument regarding the time-barred recovery under Section 11A. The Tribunal noted that the appellant did not raise this issue during the proceedings and that intentional suppression of material information warranted the application of the extended limitation period. The Tribunal's decision was based on the specific circumstances of the case, where crucial information was withheld from the authorities. Therefore, the Tribunal rejected the appellant's argument related to the limitation period for duty recovery.

In conclusion, the High Court dismissed the appeal, finding no merit in the appellant's contentions on both issues. The Court upheld the Tribunal's decision regarding the determination of annual production capacity and the application of Section 11A for duty recovery, stating that no substantial question of law arose for consideration.