2014 (7) TMI 699 - AT - Central Excise

Compound Levy Scheme - manufacturing of hot re-rolled non-alloy steel bars - Determination of annual capacity - Annual Capacity Determination Rules, 1997 - Held that - no proceedings could have been initiated under the Omitted Rules (Rule 96 ZQ, 96 ZP and 96 ZO) and after omission of Section 3A of the Act, with effect from 11th May, 2001, in the absence of any saving clause. - In the facts of this appeal, though the initiation of proceedings, by issue of a show cause notice was prior to omission of Rule 96 ZP i.e. prior to 1.3.2001, the proceedings culminated into an adjudication order dated 22.7.2004 only subsequent to omission of the relevant rule. In view of the clear pronouncement by the Gujarat High Court, determination of the appellant s liability, by the adjudication order as confirmed by the order of the ld. Commissioner (Appeals), cannot be sustained - Decided in favour of assessee.

Summary

Issues involved:
Appeal against orders confirming levy of excise duty, interest, and penalties - Interpretation of Compound Levy Scheme under Central Excise Act, 1994 - Applicability of Rule 5 of 1997 Rules for duty assessment - Effect of omission of Rule 96 ZP and Section 3 A of the Act - Validity of proceedings initiated post-omission - Compliance with saving clauses under General Clauses Act - Judicial precedents on consequences of rule omission.

Analysis:

Issue 1: Interpretation of Compound Levy Scheme under Central Excise Act, 1994
The appellant, a Steel Rolling and General Mills, opted for benefits under the Compound Levy Scheme introduced by the Central Government. The annual capacity of the mills was provisionally fixed, leading to a specific duty liability. The appellant discontinued one mill, resulting in a re-determination of the annual capacity by the Commissioner. The Tribunal directed finalization of the capacity, which was subsequently done. The Supreme Court's judgment in a related case clarified that duty assessment should be under Rule 5 of the 1997 Rules, resolving the dispute on the applicable rule for duty calculation.

Issue 2: Effect of omission of Rule 96 ZP and Section 3 A of the Act
Rule 96 ZP of the Central Excise Rules, 1944, along with other rules, was omitted with effect from specific dates. The appellant contended that post-omission proceedings should not have been initiated or concluded. Citing a Gujarat High Court judgment, the appellant argued that the omission of Rule 96 ZP and Section 3 A of the Act rendered subsequent proceedings invalid. The High Court's interpretation of the consequences of rule omission, supported by Supreme Court precedents, emphasized that proceedings under omitted rules could not be initiated or concluded post-omission without a saving clause.

Issue 3: Validity of proceedings initiated post-omission
The appellant challenged the validity of the adjudication orders confirming duty liability, interest, and penalties, arguing that they were issued after the omission of Rule 96 ZP. The Gujarat High Court's decision was pivotal in determining that proceedings initiated before the omission but concluded after were not sustainable. The Tribunal, following this reasoning, quashed the adjudication orders and confirmed that the liability determination post-omission could not stand.

Conclusion:
The Tribunal allowed the appeals, quashing the adjudication orders and confirming that the liability determination post-omission was invalid. The judgment highlighted the significance of rule omission and the impact on subsequent proceedings, emphasizing the need for compliance with saving clauses under the law.