2002 (9) TMI 239 - AT - Central Excise

Summary

Issues:
1. Discrepancy in determining annual capacity of production for Central Excise duty payment.
2. Applicability of compounded levy scheme for hot re-rolling steel mills.
3. Re-determination of annual capacity due to non-functional pinion stand.
4. Interpretation of Circular No. 331/47/97-CX for determining production capacity.
5. Legal implications of temporary non-working of machinery on duty liability under compounded levy scheme.

Issue 1: The judgment concerns a hot re-rolling steel mill disputing a higher duty amount imposed due to the re-determination of the annual capacity of production. The appellant had been discharging Central Excise duty based on the annual capacity determined by the Commissioner. However, a penalty of Rs. 25 Lakhs was imposed, challenging the findings of the impugned order.

Issue 2: Hot steel re-rolling mills are liable to pay duty on a compounded levy basis as per Section 3A of the Central Excise Act. The annual capacity of production is crucial for determining duty liability. The appellant's duty payment was based on the annual capacity determined by the Commissioner under the Hot Re-Rolling Steel Mills Annual Capacity Determination Rules, 1997.

Issue 3: The dispute arose when Central Excise Officers observed that a pinion stand "C" in the appellant's factory was non-functional during a visit. The impugned order recalculated the duty liability based on the factors relevant to pinion stand "A" instead of "C," resulting in a higher duty demand. The appellant contested this re-determination as illegal under the compounding scheme.

Issue 4: The appellant argued that the machinery defect leading to the temporary non-working of pinion stand "C" should not trigger a re-determination of the annual capacity of production. The Circular No. 331/47/97-CX provided guidelines for determining production capacity, emphasizing the significance of the pinion center distance in the process.

Issue 5: The judgment emphasized that under the compounded levy scheme, duty payment is based on the annual capacity of production, not on actual production. Temporary machinery breakdowns or changes in production arrangements do not warrant duty revision unless there is a change in the installed capacity. The tribunal concluded that the impugned order was misdirected in demanding higher duty due to the non-functional pinion stand "C," allowing the appeal with consequential relief to the appellant.