2001 (3) TMI 442 - AT - Central Excise

Summary

Issues Involved:
1. Eligibility to pay duty of excise on the basis of Annual Capacity of Production under Section 3A of the Central Excise Act and Rules 96ZQ of the Central Excise Rules.
2. Legitimacy of the Commissioner's demand for duty without challenging the Final Order passed earlier.
3. Applicability of Circular dated 16-7-1999 regarding the requirement of insulation in Hot Air Stenters.
4. Determination of whether the stenter used by the appellants was capable of drying fabrics.
5. Authority of the Commissioner to review his own order.
6. Validity of the demand for duty raised within the period of six months under Section 11A of the Central Excise Act.
7. Imposition of penalty on the appellants.

Detailed Analysis:

1. Eligibility to Pay Duty of Excise:
The appellants, M/s. Standard Niwar Mills, are engaged in the processing of cotton fabrics as Independent Textile Processors. They filed a declaration about installing a Hot Air Stenter and the Commissioner provisionally determined their annual production capacity and monthly duty liability. The Central Board of Excise & Customs clarified that stenters without insulated chambers could not determine production capacity, thus the compounded levy scheme was inapplicable. The Commissioner issued a show-cause notice denying the compounded levy and demanded differential duty.

2. Legitimacy of the Commissioner's Demand:
The learned counsel argued that the Commissioner's present proceedings were a review of the earlier Final Order dated 2-6-1999, which is not within his jurisdiction. The counsel cited the Supreme Court's decision in C.C.E., Kanpur v. Flock (India) Pvt. Ltd., stating that an order not appealed cannot be questioned later through a refund claim.

3. Applicability of Circular Dated 16-7-1999:
The show-cause notice was based on the Circular which required insulation in Hot Air Stenters. The counsel contended that any action based on the Circular should be prospective, not retrospective. The Panchnama confirmed that the stenter was used for drying the cotton cloth with steam and heaters, despite the lack of insulation.

4. Capability of the Stenter to Dry Fabrics:
The Commissioner held that the stenter must perform drying, heat setting, and chemical fixation to qualify for compounded levy benefits. The appellants argued that the stenter used for drying suffices under the Notification. Experts confirmed that the stenter performed drying, making the requirement of insulation irrelevant.

5. Authority of the Commissioner to Review His Own Order:
Section 11A of the Central Excise Act allows issuing show-cause notices for short-levied duty. The show-cause notice dated 4-8-1999 demanded duty for the period 1-1-1999 to 30-6-1999, within six months. Thus, the Commissioner's action was within legal bounds, not a review of his own order.

6. Validity of the Demand for Duty:
The demand was raised within six months as per Section 11A of the Central Excise Act, making it valid. The Commissioner's demand for duty was upheld, subject to the appellants providing evidence for Modvat Credit.

7. Imposition of Penalty:
The penalty was deemed inappropriate as the duty liability was initially fixed by the Department. The penalty was set aside, but the duty demand was upheld, allowing the appellants to prove their eligibility for Modvat Credit within one month.

Conclusion:
The Tribunal upheld the duty demand but set aside the penalty. The appellants were directed to provide evidence for Modvat Credit within one month. The Commissioner's actions were found to be within jurisdiction, and the demand for duty was validly issued within the stipulated period.