1996 (2) TMI 242 - AT - Customs

Summary

Issues Involved:

1. Eligibility for concessional rate of duty under Notification 128/77 based on annual installed capacity.
2. Validity of the show cause notice issued under Rule 10.
3. Determination of the annual installed capacity of the paper mill.

Issue-wise Detailed Analysis:

1. Eligibility for Concessional Rate of Duty:

The primary issue was whether the appellants were eligible for a concessional rate of duty under Notification 128/77, which required the annual installed capacity of the mill to not exceed 5,000 MT. The appellants argued that their installed capacity was below this threshold, while the Department contended it was higher.

2. Validity of the Show Cause Notice:

The appellants argued that the show cause notice issued under Rule 10 was invalid as Rule 10 was omitted on 17-10-1980, and Section 11A, which replaced it, required a maximum period of five years for issuing such notices. They cited the judgment in Mahendra Mills Ltd. v. Union of India, which stated that "adjudications made in the light of the earlier notices under Rules 10 and 10A could not survive after 7-10-1980 despite the fact that almost analogous statutory provisions were enacted in the Act by bringing in Section 11A from that very date." However, the Tribunal found that Section 11A maintained continuity with similar wording to Rule 10, thus making the show cause notice legal and allowing proceedings to continue post-17-11-1980.

3. Determination of Annual Installed Capacity:

The appellants claimed their installed capacity was limited to 14.05 tonnes per day based on the maximum drying capacity of their machine. They referenced several judgments, including Aurangabad Paper Mills Ltd. v. CCE, which held that installed capacity should be based on the designed capacity of the machinery rather than mechanical calculations by the Department. The appellants also cited Upper India Couper Paper Mills Co. Ltd., where it was held that certificates from the DGTD and other authorities should not be discarded without proper justification.

The Department relied on various certificates and letters from the Ministry of Industry and DGTD, indicating that the installed capacity was much higher. They calculated the installed capacity based on machine specifications and operational parameters, arriving at a figure of 14,113 MT per annum.

The Tribunal observed that while the actual production never reached 6,000 MT, the installed capacity, as indicated by the industrial license and permissions, exceeded 5,000 MT. They concluded that the installed capacity should be considered as 9,000 MT per year based on the Ministry of Industry's communications, despite the Department's higher estimate based on assumptions and presumptions.

Conclusion:

The Tribunal directed the Assistant Collector to recalculate the differential duty based on an installed capacity of 9,000 MT per year, modifying the impugned order accordingly. The appeal was disposed of with these directions.