2016 (3) TMI 776 - AT - Central Excise

Determination of capacity of the appellant unit at 6.4 MT - Held that - In view of the admitted fact that the furnace of capacity 3.0 MT was lying out of working condition and/or uninstalled, the learned Commissioner is in error taking the capacity of the same on the premises that as the furnaces was available in the factory premises, the same has to be considered for determining annual capacity. According to the rules only the furnace which is installed and put to use is required to be considered for determining the annual capacity. Thus we set aside the impugned order to the extent the annual capacity of production is determined at 6.4 MT and we re-determine the same at 3.4 MT for the period 1998-99. Accordingly the appellant will be liable to pay the duty, if any, unpaid on the capacity as is determined by this Tribunal. We also set aside the amount of penalty determined and fixed vide order dated 19.4.2006 determined by the Assistant Commissioner in terms of the impugned order. As we have decided the appeal on merits, we do not decide the points of law arising pursuant to amendment vide Finance Act, 2001. - Decided in favour of assessee

Summary

Issues:
- Rejection of application for redetermination of annual capacity of production under the compounded Levy scheme for the year 1998-1999.
- Discrepancy in determining the annual capacity of production at 6.4 MT instead of 3.4 MT.
- Applicability of Rule 96ZO (3) regarding changing the payment option under the compounded Levy scheme during the financial year.
- Interpretation of the rule regarding considering only installed and working furnaces for determining annual capacity.

Analysis:

1. The appellant, in this case, appealed against the rejection of their application for redetermination of the annual capacity of production under the compounded Levy scheme for the year 1998-1999. This was the third round of litigation, with the Tribunal allowing the appeal by way of remand in an earlier instance.

2. The appellant argued that the annual capacity of production was wrongly determined at 6.4 MT instead of 3.4 MT. They presented evidence that one of their furnaces of 3.0 MT capacity was sealed and not in working condition since 1997, which was acknowledged by the Commissioner. Despite this, the Commissioner included the sealed furnace in the capacity calculation, leading to the discrepancy.

3. The appellant contended that they had paid taxes based on the actual capacity of 3.4 MT and requested the impugned order determining the capacity at 6.4 MT to be set aside. The Tribunal found merit in the appellant's argument, stating that only installed and operational furnaces should be considered for determining annual capacity, not those lying sealed and non-functional.

4. The Revenue, represented by the learned DR, relied on Rule 96ZO (3) to argue against changing the payment option under the compounded Levy scheme during the financial year. They cited a Supreme Court ruling to support their position. However, the Tribunal, after considering the arguments, found that the Commissioner had erred in determining the capacity at 6.4 MT and corrected it to 3.4 MT for the relevant period.

5. In conclusion, the Tribunal allowed the appeal, setting aside the impugned order's determination of annual capacity at 6.4 MT and re-establishing it at 3.4 MT. The appellant would be liable to pay any unpaid duty based on the corrected capacity. Additionally, the penalty amount determined by the Assistant Commissioner was also set aside. The Tribunal did not delve into the legal points arising from the amendment in the Finance Act, 2001, as the appeal was decided on its merits.

This detailed analysis of the judgment provides a comprehensive understanding of the issues involved and the Tribunal's reasoning behind its decision.