ORDER
Archana Wadhwa, Member (J)
1. After dispensing with the condition of predeposit of duty and penalty, we take up the appeal itself with the consent of both the sides.
2. The appellants are engaged in the manufacture of M.S. Ingot of Non-alloy Steel falling under Chapter sub-heading 7206.90 of the Central Excise Tariff, 1985. The said goods were notified with effect from 1-9-97 under the provisions of Section 3A of the Central Excise Act, 1944. In terms of the said Section and the Rule made thereunder, the appellants vide their letter dated 26-9-97 addressed to the Superintendent of Central Excise provided the parameters/capacity/type/ size etc. of their induction furnace. Based upon the information given by the appellants, their Annual Capacity of Production (hereinafter referred to as ACP) was determined by the Commissioner as 20,800 MT, in terms of provisions of Sub-rule (4) of Rule (3) of the Induction Furnace Annual Capacity Determination Rules, 1997. The said determination was on provisional basis. Thereafter, the same was represented against by the appellants and the matter travelled up to CEGAT and was remanded for re-determination purposes. The ACP was again determined as 20,800 MT.
3. However, the dispute in the present appeal relates to three show-cause notices issued on 27-8-98, 21-7-99 & 19-12-2000 raising demand of duties against the appellants on the alleged ground that they have not charged duty liability in terms of ACP fixed by the Commissioner under the relevant rules. The appellants’ contention before the adjudicating authority was that inasmuch as their annual production was less than the ACP fixed, their duty liability should be redetermined in terms of the provisions to Section 3A(4). The said contention was not accepted by the Commissioner who confirmed the demand of duty against the appellants and imposed penalty vide his impugned order.
4. We have also heard Shri R. Santhanam, ld. Advocate for the appellants and Shri T.K. Kar, ld. SDR for the Revenue.
5. From the impugned order, we find that the adjudicating authority has taken a stand that since the appellants have already exercised their option to pay duty under the provisions of Rule 96ZO(1), they have to pay duty at the rate of Rs. 750 per MT on the monthly pro-rata basis in terms of ACP. As regards their claim for discharging the duty liability in terms of provisions of Section 3A(4), he has observed that the appellants’ unit has started newly in the month of May, 1997 and there cannot be any indicator about their past performance on actual production basis. Shri Santhanam, ld. Advocate appearing for the appellants submits that the above reasoning of the adjudicating authority is erroneous inasmuch as there is no reference to the past production under the provisions of Section 3A(4). Shri Santhanam also disputes the findings of the adjudicating authority which are to the effect that if the plea of the assessee is accepted, the purpose and objective of formulating the scheme for compounded levy on paying duty on ACP would stand fully defeated. The Commissioner has observed that had it been so, then there was no need of formulating a scheme making rules for annual capacity determination and for fixing ACP, if the assessee have to be given liberty to pay duty on so-called actual production. He has further observed that it is being noticed that all the assessees in the State of Bihar have made the claim for fixing their duty liability in terms of Section 3A(4) i.e. on annual production basis making it a concert, as if the scheme is virtually inoperative and given a full go bye. Ld. Advocate subits that if a particular benefit is available as per the provisions of law, the same cannot be denied to the assessee on the ground all the assessees are claiming the same and fixation of the ACP has become formality. He submits that even though extending the benefit of 3A(4) where the annual production is less than the ACP, annual capacity of production is required to be fixed first for making the comparison. Referring to the adjudicating authority reliance on the decision of the Hon’ble Supreme Court in the case of Venus Castings reported in 2000 (117) E.L.T. 273 (S.C.), the ld. Advocate submits that the same is not applicable in their case inasmuch as the Hon’ble Supreme Court has held that having opted for the procedure under the provisions of Rule 96ZO(3), an assessee cannot claim the benefit of determination of production capacity under Section 3A(4) of the Act. He submits that the appellants never opted for Rule 96ZO(3) and as such the ratio of the above decision does not apply in their case. On the contrary, he submits that the same supports them. He also refers to the subsequent decision of the Hon’ble Supreme Court in the case of Union of India v. Supreme Steels and General Mills reported in 2001 (133) E.L.T. 513 (S.C.) = 2001 (47) RLT 129 (S.C.), which clarifies that the duty liability can be discharged in terms of provisions of Section 3A(4). As such, he submits that the matter should be remanded with directions to the adjudicating authority to redetermine their duty liability under Section 3A(4).
6. It is on record that the appellants never opted for payment of duty in terms of the provisions of Rule 96ZO(3), which requires the assessee having furnace capacity of 3 MTs. to pay duty on lump-sum basis of Rs. 5.00 lakhs per month. They have admittedly opted for payment of duty in terms of the provisions of Rule 96ZO(1) which require the assessee engaged in the manufacture of steel ingots to debit the amount calculated @ Rs. 700.00 per MT at the time of clearance of ingots from his factory on the Annual Capacity of Production of his factory, as determined under the Induction Furnace Annual Capacity Determination Rules, 1997. As such, it is clear that the decision of the Hon’ble Supreme Court in the case of Commissioner of Central Excise v. Venus Castings Pvt. Ltd. reported in 2000 (117) E.L.T. 273 (S.C.), will not apply inasmuch as in that case, it was held that the appellants having opted for payment of duty in terms of the procedure, envisaged under Rule 96ZO(3) of Central Excise Rules, 1944, cannot claim the benefit of determination of production capacity under Section 3A(4) of the Act. Inasmuch as the appellants have opted for payment of duty under Rule 96ZO(1), the provisions of Section 3A(4) cannot be excluded. In fact, the Supreme Court in the case of Venus Castings has observed in para 8 of their judgment that if the Annual Capacity determined by the Commissioner is disputed by the assessee, the Commissioner is required to re-determine the same, as provided in Section 3A(4). To the similar effect is another decision of the Hon’ble Supreme Court in the case of Union of India v. Supreme Steels and General Mills reported in 2001 (133) E.L.T. 513 (S.C.) wherein it was observed that Excise duty may be charged on the basis of actual production.
7. Now, we find that alternative mode of payment of duty on the non-alloy steel ingots is as per the provisions of Rule 96ZO(1). In terms of the said Rule, a manufacturer of non-alloy steel ingots is required to pay total amount calculated @ Rs. 750.00 per MT on the annual capacity of production of his factory as determined under the Induction Furnace Annual Capacity Determination Rules, 1997. Section 3A(4) of Central Excise Act, 1944 is to the effect that where an assessee claims that the actual production of notified goods in his factory is lower than the production determined under Sub-section (2), the Commissioner of Central Excise shall, after giving an opportunity to the assessee to produce evidence in support of his claim, determine the actual production and determine the amount of duty payable by the assessee with reference to such actual production at the rate specified in Sub-section (3). Sub-section (5) of Section 3A is to the effect that where the Commissioner of Central Excise determines the actual production under Sub-section (4), the amount of duty already paid, shall be adjusted against the duty so redetermined and if the duty already paid, falls short or is in excess of the duty so re-determined, the assessee shall pay the deficiency or be entitled to a refund as the case may be. A reading of the above two sub-sections of Section 3A shows that the same enables the manufacturer to pay duty on the basis of the actual production, if the same is less than the production determined under Sub-section (3). Sub-section (2) requires determination of the Annual Capacity of the production, which shall be deemed to be the annual production of such goods by the factory in question. As such, it is seen that for finding out whether the actual production is less than the annual capacity of production, it is first necessary to fix the annual capacity of production in terms of Sub-section (2) of Section 3A. As such, it cannot be said that once the Annual Capacity of Production is fixed, the appellants cannot claim entitlement to pay duty on the basis of actual production. Sub-section (4) and Sub-section (5) clearly envisage a situation where the actual production is less than the Annual Capacity of Production so fixed under the provisions of Sub-section (2).
8. In the instant case, the appellants have claimed that their annual production was less than the ACP fixed by the Commissioner, for which the situation under the provisions of Section 3A(4) & (5) would become operative. As such, we set aside the impugned order and remand the matter to the Commissioner for deciding the appellants’ duty liability in terms of provisions of Section 3A(4) and 3A(5).
9. Needless to say that the appellants would substantiate their claim of less annual production by way of evidence before the adjudicating authority. Appeal is thus allowed by way of remand for determination of the appellant’s duty liability in the light of the observations made by us. Stay Petition also gets disposed of.