Jindal Steel and Power Limited vs Commissioner of Central Escise and Customs

Abhay Manohar Sapre, J.—Heard. This is an appeal filed by the assessee u/s 35G of the Central Excise Act (for short called "the Act") against the order 15.12.2003 passed by Customs Excise and Service Tax Appellate Tribunal (for short hereinafter called "the Tribunal" ) in Appeal No. E/730/2003-NB (A ).

By impugned order, the Tribunal dismissed the assessee''s appeal and confirmed the order passed by the Commissioner Central Excise, Raipur dated 8.4.2003.

So the question that arises for consideration in this appeal is whether it involves any substantial question of law for its admission on merits.

Since the facts of the case are short so also the order passed by the Tribunal dismissing assessee''s appeal, which has given rise to filing of this appeal it is apposite to reproduce the impugned order dated 15.12.2003 in verbatim ( except the diagram of the Furness) to appreciate the short controversy.

The appellant, M/s. Jindal Steel & Power Ltd. is a manufacturer of M.S. Ingots. The production is by use of Induction Furnaces. Such units could pay duty at compounded rates based on their annual capacity of production. The production was also required to be determined in terms of Induction Furnaces Annual Capacity Determination Rules, 1997. Appellant had installed two Induction Furnaces of 3 MT capacity each. Under sub rule (3) of Rule 96ZO of Central Excise Rules, a manufacturer could exercise an option to pay amount of Rs. 5 lakhs every month towards full discharge of duty liability in respect of a 3 MT capacity furnace. The appellant opted for discharge of duty liability on this basis for the two furnaces. The impugned order has held that that for the full period (1.9.97 to 31.03.2000), when the appellant functioned under compounded levy scheme, they were liable to pay duty of Rs. 10 lakhs every month in view of the two furnaces of 3 MT each installed in the appellant''s premises. The appellant had been disputing the capacity determination on the ground that even though they had two furnaces/crucible installed in their unit, at any given time, only one unit was functional and the other was idle. The appellant has submitted that, in order to run both the furnaces concurrently, a unit requires separate power connection for each furnace from the transformer. It is the appellant''s contention that they had disconnected power supply from one electric panel w.e.f. 1.11.97 thereby making it not possible to run both the crucibles at the same time. It has also been pointed out that not only the power supply from one panel had been cut, electric cables connecting through that panel had also been cut and sealed. The appellants have illustrated the position through the following diagrams :

: (diagrams)

The appellant had also submitted that these facts were known to the Central Excise authorities.

Under the impugned order, Commissioner, Central Excise has rejected the appellant''s claim for treating the duty payable only in respect of one furnace and has held that duty is liable to be paid on the basis of installed capacity and that since the appellant had two furnaces installed in their factory, annual capacity of production is required to be determined taking the installed capacity of two Induction Furnaces of 3 MT each.

The contention of the appellant is that even though the two furnaces were installed in the appellant''s factory, since production was possible only in one at a given time (because of the disconnection of power supply from one electric panel) the installed capacity has to be taken as for one furnace. Appellant has submitted that the Circular No. 325/41/97-CX dated 25.7.97 of the Central Board of Excise and Customs has specifically clarified (para 6) that some Induction Furnaces have "idle" crucibles and that the capacity has to be determined excluding the "idle" (spare or standby) crucible.

Learned SDR has pointed out that the submission of the appellant has no basis inasmuch as the fact of installation of two furnaces/crucibles is not disputed. Further, the appellant''s submission is not that one crucible was idle, but that both crucibles worked alternatively. Learned SDR has also pointed out that the reliance placed on para 6 of the Board''s Circular was not correct and subsequent paras 11 and 12 made clear that a unit opting for payment of duty at Rs. 5 lakhs for furnace of 3 MT under sub-rule(3) of Rule 96ZO will not be eligible for any deduction under sub-section (3) and sub-section (4) of Section 3A of Central Excise Act. Learned SDR has also submitted that the issue is no more open for argument inasmuch as the Apex Court has held in the case of Commissioner of Central Excise and Customs Vs. M/s. Venus Castings (P) Ltd., that a unit opting to pay duty under Rule 96ZO (3) will not be eligible for any claim for deduction on the basis of sub-section (3) and sub- section (4) of Section 3A.

It is not in dispute that the appellant had two furnaces or crucibles of 3 MT capacity. Appellant had also opted to pay duty under Rule 96ZO(3). The measure for compounding laid down under Induction Furnace Rules is the annual capacity and not the actual capacity utilized. Therefore, the appellant''s claim for reduction in duty liability based on the fact that they had disconnected the power supply through one electric panel is not sustainable. It is also settled in view of the decision of the Apex Court in Venus Castings supra that a unit opting under sub-rule (3) of Rule 96ZO cannot claim the benefit u/s 3A of Central Excise Act. Thus, the appellant could also not claim abatement on the ground that they had did not produce or that the duty demand should be determined on the basis of actual production.

In view of the above, we find no merit in the appeal. It stands dismissed.

(Operative part of the order was already pronounced in open Court on 15.10.2003)

The appellant is a Limited company registered as such under the companies Act. It is engaged in the business of manufacture and sale of a commodity known as "M.S. Ingots". This commodity is manufactured by appellant with the use of "Induction Furnaces". It is an excisable commodity under the provisions of the Central Excise Act.. The appellant (assessee) is, however, given option to pay excise duty on this commodity at compounded rates, which is based on the annual capacity of their production. The production is required to be determined in terms of Induction Furnaces Annual Capacity Determination Rules 1997.

The appellant has installed two induction furnaces in their factory each having 3 MT capacities for manufacture of this commodity. In terms of Rule 96ZO (3), the appellant has a right to exercise the option to pay an amount of Rs. 5 Lakh every month towards full discharge of duty liability in respect of 3 MT capacity furnace.The appellant opted to pay duty by taking recourse to this mode of payment for the period in question i.e. 1.9.97 - 31.3.2000.

The appellant had however disputed their capacity determination made by the authorities of their furnaces. According to them, out of their two furnaces, only one furnace was functioning at the relevant time, whereas, the other one was not functioning and remained idle through out and hence, the installation of one which remained idle could not be taken into consideration while determining their annual capacity. In other words, their basic contention was that though they have installed 2 furnaces each having 3 M.T. capacity but only one furnace was in operation, whereas, other remained idle during the relevant time and it was for this reason, their annual capacity was required to be determined treating only one furnace to be in operation and not both and accordingly, excise duty should have been recovered.

The Commissioner of Central Excise did not accept this contention of the appellant and called upon the appellant to pay excise duty on the basis of their two installed furnaces i.e. each Rs. 5 lakh per month (total Rs. 10 lakh). The appellant felt aggrieved of this order and filed appeal before the Tribunal. The Tribunal also by the impugned order found no merit in the appeal and accordingly, upheld the order of the Commissioner of Central Excise. It is against this order; the appellant has felt aggrieved and filed this appeal.

9.Having heard learned counsel for the appellant (assessee) and on perusal of the record of the case, we are of the considered opinion, that the appeal does not involve any question of law much less substantial question of law and hence, we find no ground to admit this appeal.

At the outset, we may observe and indeed are of the considered opinion that the question as to whether two furnaces installed by the appellant were functioning or out of two only one was functioning at the relevant time was essentially a question of fact and did not involve any question of law much less substantial question of law. Secondly, when the Commissioner of Central Excise and then, the Tribunal had concurrently recorded a finding of fact that the appellant was at the relevant time not only opted for payment of the duty on the basis of their two furnaces and further, both were found in operation, then, such finding being pure finding of fact and being concurrent in nature, was binding on this Court and lastly, such finding of fact could not be regarded as such that it was either perverse to its extreme or against the evidence on record or against any provision of law so as to constitute any substantial question of law for admitting this appeal on such question.

We have noticed that the appellant had come out with one factual explanation as to how and why they said that their one furnace was not functioning at the relevant time but the said factual explanation did not find favour to both the authorities and now this Court as the third Court of appeal was not permitted to examine the reasonability, or sufficiency or adequacy or genuineness of the cause /explanation given by the appellant (assessee) in support of their case. It was not permissible to probe such question of fact within the parameters contained in Section 35G ibid.

Their Lordship''s of Supreme Court in a case reported in Commissioner of Central Excise and Customs Vs. M/s. Venus Castings (P) Ltd., has held that once the assessee has opted for payment of excise duty under Rule 96ZO (3) of the Rules, then, they have no choice but to continue to pay by that mode only and are not permitted to change the mode as prescribed u/s 3-A(3) and (4) ibid. This authority was rightly relied upon by the Tribunal while deciding the appeal in this case and the same has full application to the facts of this case too.

Learned Counsel for the appellant (assessee) essentially addressed the Court on the factual matrix of the case and contended that one furnace was not operating. As mentioned supra, we cannot entertain this factual submission, as it is not within our jurisdiction to examine such question of fact. We, therefore, do not deal with this issue at length and reject the same being devoid any merit.

In the light of foregoing discussion, we find no merit in this appeal as it does not involve any question of law much less substantial question of law within the meaning of Section 35G and what is involved and urged is only questions relating to facts and hence this appeal is found to be devoid of any merit. It fails and is accordingly dismissed in limine. As a consequence, all interim orders staying recovery of the duty are vacated and recalled. The appellant now must ensure compliance of the impugned orders in accordance with law.