Commissioner of Cus. & C. Ex. vs Shanti Steel Rolling Mills

Heard learned counsel Sri Pary Agarwal for the department and Sri A.P. Mathur for the assessee.

This is an appeal filed by the department under Section 35G of the Central Excise Act, 1944 against an order passed by the Tribunal dated 20-8-2010 [2011 (265) E.L.T. 60 (Tribunal)] for the period 31-11-1998 to 31-3-1999 whereby the appeal of the assessee was partly allowed and the duty for the period 31-11-1998 to 31-3-1999 was determined to be based on the redetermined annual capacity of production.

The question of law referred to as hereunder :-

"Whether in absence of any permission from the Commissioner, Central Excise for making changes the benefit of Rule 4 read with Rule 3 of the Hot Re-Rolling Steel Mills Annual Capacity Determination Rules, 1997 could be given to the assessee?"

The facts of the case are that the respondent is a manufacturer of Hot Re-Rolling products of Iron and Steel such as M.S. Section, T. Iron angle, etc., dispute in the present appeal is with regard to Annual Capacity of Production (ACP) from 24-12-1998 to 31-3-1999 as 2,347.07 MT per annum as against the capacity of 880.5 MT claimed by respondent.

On 6-8-1997 the respondent opted the compounding scheme under Rule 96ZO(3) of the Central Excise Rules, 1944 (hereinafter referred to as Rules) for full and final discharge of their duty liabilities under Section 3A of the Central Excise Act, 1944 (hereinafter referred to as Act). The ACP was finally fixed as 2,672.75 MT per annum.

For the Financial Year 1998-99 the ACP of respondent Mill was recommended as follows :-

2,672.75 MT

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period 1-4-98 to 6-8-98

2,521.786 MT

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period 7-8-98 to 23-12-98

2,347.07 MT

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period 24-12-1998 to 31-3-1999

The ACP for period from 24-12-1998 to 31-3-1999 was determined on 20/22-4-1999 at 2,347.07 MT per annum by the Commissioner, Central Excise, Meerut-II.

The aforesaid Order dated 20-4-1999 was set aside by the Customs, Excise and Gold (Control) Appellate Tribunal, New Delhi vide Final Order No. A/587/02-NB (SM), dated 18-4-2002 in the appeal filed by the respondent. The matter was remanded for deciding afresh after affording opportunity of personal hearing to the assessee and after taking into consideration the Larger Bench''s decision of the Tribunal in the case of Sawanmal Shibumal Steel Rolling Mills v. CCE, Chandigarh-I, reported as 2001 (42) RLT 75 : 2001 (127) E.L.T. 46 (Tri.-LB)

On 9-6-2008 pursuant to aforesaid order of the Appellate Tribunal, the Commissioner of Central Excise passed the order in accordance with law after affording the opportunity of hearing to the assessee. He reconfirmed the order dated 20-4-1999 invoking Rule 5 which provided that in case the annual capacity determined by the formula in sub-rule (3) of Rule 3 in respect of a mill, is less than the actual production of the mill during the financial year 1996-97, then the annual capacity, so determined shall be deemed to be equal to the actual production of the mill during the financial year 1996-97. Annual production during base year 1996-97 was 2,347.07 MT/annum. Hence in terms of Rule 5 the order was passed.

Aggrieved with the aforesaid order of the Commissioner, Central Excise, Meerut-II the respondent filed an Appeal No. E/2073/2008-SM(BR) which was allowed by the Customs, Excise and Service Tax Appellate Tribunal, New Delhi vide Final Order No. 803/2010-SM (BR), dated 16-7-2010 [2011 (263) E.L.T. 60 (Tribunal)].

The Appellate Tribunal held as under :-

"The appeal is, therefore, partly allowed and the duty liability for the period 31-11-1998 to 31-3-1999 shall be based on redetermined annual capacity of production which is 880.5 MT/annum."

This very issue has now been finally set at rest by the Apex Court in the case of Commissioner of Central Excise, Chandigarh v. DOABA Steel Rolling Mills reported in [2011 (269) E.L.T. 298 (S.C.)] wherein the Apex Court has come to the conclusion that Rule 5 of the 1997 Rules, is not fettered in any way by any restriction and can be invoked even in a case of determination of the annual capacity of production of the factory where there has been a change in the installed machinery or any part thereof.

In view of the above, question stands answered in favour of the department and against the assessee.

The present appeal is, accordingly, allowed.