ORDER
Jyoti Balasundaram
1. Common issues are involved for determination in the above batch of appeals and hence they are heard together and disposed of by this common order.
2. The first issue to be decided is whether the assessees herein who are iron and steel rolling mills which have exercised the option of availing of procedure prescribed under Rule 96ZO(3) for determination of their annual capacity of production under the compounded levy scheme, can opt out of the scheme and claim the benefit of determination of production under Section 3(A) (4) of the Central Excise Act. The second issue relates to the method of determination of annual capacity of production.
3. Our findings on the above issues are as under:
Issue No.1
This issue stands decided by the Apex Court judgment in the case of Commissioner of Central Excise vs. Venus Castings P.Ltd. reported in 2000 (117) ELT 273 (SC) wherein the Supreme Court has held that “the schemes contained in Section 3(A) (4) of the Act and Rule 96ZO(3) or Rule 96ZP(3) of the Excise Rules are two alternative procedures to be adopted at the option of he assessee. Thus the two procedures do not clash with each other. If the assessee opts for procedure under Rule 96ZO(1), he may opt out of the procedure under Rule 96ZO(3) for a subsequent period and seek determination of annual capacity of production. An assessee cannot have a hybrid procedure of taking advantage of the payment of lumpsum on the basis of total furnace capacity and not on the basis of actual capacity of production. Such a procedure cannot be adopted at all, for the two procedure are alternative schemes of payment of tax”. (paragraph 10 of the judgment). It is the contention of M/s.Ranjeev Alloys Ltd. that they had challenged the compounded levy scheme before the Hon’ble Delhi High Court which decided the Writ Petition in their favour and that, in the pending appeal filed by the Union of India before the Apex court, interim orders dated 21.4.98 have been passed to take actual production as the basis for determining duty and, therefore, their annual capacity of production should be determined accordingly. Similarly, the contention of M/s.Deepak Castings P.Ltd., who are writ petitioners before the Rajasthan High Court, M/s.Vikky Castings P.Ltd, Venus Loha Udyog Ltd., Venus Castings, Shree Jagadambey Castings Ltd. and Panem Castings P.Ltd,. who are petitioners before the Hon’ble Delhi Court is that their cases should not be decided in the light of the Apex Court order in the case of Venus Castings supra, since their writ petitions are pending before the respective High Court. However, notwithstanding the fact that the above mentioned appellants are assessees whose petitions are pending before the High Courts, it is the judgment of the Supreme Court which is the law of land and we are required to follow it. We also note, as pointed out by the learned DR, that the review petition filed by Venus Castings against the judgment reported in 2000 (117) ELT 273 has been dismissed by the Hon’ble Supreme Court. We, therefore, hold that the Venus Castings judgment of the Supreme Court will be applicable to all these cases. Applying the ratio of the above judgment we hold that the assessees can opt out of the procedure under Rule 96ZO(3) for the subsequent period. The question as to what is meant by subsequent period is hotly debated before us. According to the assessees, it is the date of opting out which is relevant while according to the learned DR opting out can be made effective only with effect from the succeeding financial year since the relevant Rules only speak of financial year. We are, however, not persuaded to agree with the contention of the learned DR. It is pertinent to note that the Apex Court has not used the expression “subsequent financial year”, even though the focus of the Court was on Rule 96ZO(3). Further, even in the case of SSI Units where it is the value of clearances during a particular financial year that is relevant, it has been held that an SSI unit can opt out in the same financial year. We, therefore, reject the submission of the learned DR that an assessee who has opted for the procedure prescribed under Rule 96ZO(3) can opt out of the procedure and choose to be covered by the procedure prescribed in Rule 96ZO(1) only from the succeeding financial year. We hold that opting will be operative from the first of the succeeding month as duty liability is on monthly basis.
Issue No.2
Regarding the method of determination of annual capacity of production under Rule 96ZO(3), we note that this issue stands settled by the decision of the Tribunal in the case of Arihant Steels vs. Commissioner of Central Excise reported in 2000 (124) ELT 564 and Ganpati Industries vs. Commissioner of Central Excise, Kanpur reported in 1998 (28) RLT 231 wherein it has been held that the capacity of the induction furnace as shown in the invoice of the manufacturer/supplier has to be taken as the basis for annual capacity of production determination. The Tribunal has noted that according to Rule 3 of the Induction Furnace Annual Capacity Determination Rules 1997, the annual capacity production shall be determined by the Commissioner on the basis of authenticated copy of the manufacturer’s invoice. In case of non-availability of invoice, Rule 3 further provides that the Commissioner shall ascertain the capacity of the furnace on the basis of capacity of comparable furnace installed in any other factory in respect of which the manufacturer’s invoice indicating the furnace capacity is available and the Commissioner may consult any technical authority for this purpose. In the case of Arihant Steels, the Tribunal has held that when the furnace manufacturer’s invoice showing the furnace capacity is available, there is no need for the Commissioner to ascertain the position by alternative method provided under Sub-rule (2) of Rule 3. Applying the ratio of the above judgment, we hold that the capacity of the India Furnace as shown in the manufacturers/suppliers invoice is to be taken as the basis for determination of annual capacity.
4. In the light of our findings on the above issues, let us dispose of each individual appeal.
1. M/s. Ranjeev Alloys Ltd. – E/3208/98-NB) & E/1100/99-NB
In this case, the assessee exercised their option under Rule 96ZO(3) and did not revoke the same. However, they disputed the ACP determination stating that the capacity had been wrongly arrived at. They also submit that the unit stood closed from 26.11.97 and, therefore, duty liability can be confirmed only upto that date and that even their claim for abatement due to closure requires to be considered. Applying our findings on issue No.2 to this assessee, we set aside the impugned order and allow these appeals by remand to the jurisdictional Commissioner for fresh determination of the capacity of production on the basis of the capacity of the furnace. The Commissioner shall also verify the submission of the assessee that their units stood closed from 26.11.97 and he shall also consider their claim for abatement.
2. M/s.Meenakshi Castings – E/3229/95-NB
The assessee opted out of the compounded levy scheme vide letter dated 24.3.98 and, therefore, for the period subsequent to 1.4.98, the actual production capacity will be determined by the provisions of Section 3A(4) of the Act read with Rule 96ZO(1) of the Rules.For the period prior to 1.4.98, the ACP of the factory shall be determined on the basis of the manufacturer’s/supplier’s invoice regarding furnace capacity. The impugned order is set aside and the case remanded to the Jurisdictional Commissioner for redetermination of the actual production according to the guidelines set out above.
3. M/s.Inder Steels P.Ltd – E/3230/98-NB
The assessees opted out of the compounded levy scheme w.e.f. 1.5.98; therefore, their actual production is required to be determined as per Section 3(A)(4) of the Act read with Rule 96ZO(1) of the Rules w.e.f. the above mentioned date, and for the period prior thereto, the ACP shall be determined under Rule 96ZO(3) on the basis of the furnace capacity shown in the manufacturer’s/supplier’s invoice. This appeal is allowed by remand to the Commissioner after setting aside the impugned order.
4. M/s.Deepak Castings P.Ltd – E/3325/98-NB
The assessee opted out of the compounded levy scheme by letter dated 22.5.98; hence, they will be governed by the procedure under Rule 96ZO(1) w.e.f. 1.6.98. The assessees do not dispute the ACP determination in terms of Rule 96ZO(3). Therefore, we uphold the capacity as determined by the Commissioner and hold that it shall be applicable upto 31.5.98. For the subsequent period, the actual production has to be redetermined according to Section 3(A)(4) of the Act read with 96ZO(1) of the Rules for which purpose, we remand the case to the Commissioner.
5. M/s.Vikky Castings P.Ltd. – E/14/99-NB
The assessee opted out of the compounded levy scheme under cover of their letter dated 12.1.98. Hence, w.e.f. 1.2.98, their actual production is to be redetermined under provisions of Section 3(A)(4) of the Act read with Rule 96ZO(1) of the Central Excise Rules for which purpose, we remand the case to the jurisdictional Commissioner. There is no dispute regarding the determination of ACP in terms of Rule 96ZO(3) which will be applicable upto 31.1.98.
6. M/s.U.P. Alloys P.Ltd. – E/125/99-NB
The assessees opted out of the compounded levy scheme by their letter dated 1.6.98 which was filed on 15.6.98. Hence on and from 1.7.98 which is the first of the succeeding month, the actual production will have to be redetermined under Section 3(A)(4) of the Act read with Rule 96ZO(1) of the Central Excise Rules. For the period prior there to, since the assessees contend that the capacity has been wrongly determined by ignoring furnace manufacturer’s invoice, the ACP for the period from September 97 (when the compounded levy scheme came into force till 30.6.98) will have to be redetermined on the basis of the furnace capacity. The impugned order is thus set aside and the appeal allowed by remand to the jurisdictional Commissioner.
7. M/s.Venus Loha Udyog – E/264/99-NB
The assessees opted out of the compounded levy scheme vide their letter dated 9.1.98; hence for the period from 1.2.98 onwards, their actual production has to be redetermined in terms of Section 3(A)(4) of the Act read with Rule 96ZO(1). As for the period prior thereto, the assessees submit that the capacity has been wrongly determined ignoring the verification carried out on 26.1.98 and contend that due to confusion over measurement in inches which was wrongly recorded in centimeters, the capacity has been wrongly arrived at.
We find that the Commissioner has denied any verification carried out on 26.1.98 and that even if any verification was done on that date, it was not in association with the Central Excise Officers. However, a perusal of the records shows that this is not factually correct. Therefore, the Commissioner is required to redetermine the ACP of the assessee’s furnace in terms of Rule 96ZO(3) for the period prior to 1.2.98 after carrying out fresh verification by technical experts. The impugned order is, therefore, set aside and the case remanded to the jurisdictional Commissioner for fresh determination according to the above guidelines.
8. M/s.Shivangi Steels P.Ltd. – E/265/99-NB
The assessees opted out of the compounded levy scheme on 15.4.98. Hence, from 1.5.98, their actual production is to be redetermined according to Section 3(A)(4) of the Act read with Rule 96ZO(1). For the prior period, when the assessees were covered by the procedure prescribed under Rule 96ZO(3), the ACP is to be redetermined on the basis of the furnace manufacturer’s/supplier’s invoice, and not on the basis of verification of physical parameters, as has been done by the Commissioner. We, therefore, set aside the impugned order and remand the case for fresh determination to the jurisdictional Commissioner.
9. Venus Castings P.Ltd. – E/792/99-NB
This assessee did not opt out of the compounded levy scheme. The ACP determination is also not disputed by them. The only plea raised before us is that the factory stands closed from December 97. However, there is no evidence to bear out this contention in the form of any communication to the jurisdictional Central Excise authorities, etc. Therefore, we see no reason to interfere with the impugned order and accordingly, uphold the same and reject this appeal.
10. M/s.Avadh Alloys P.Ltd. – E/1215/99-NB
This assessee did not opt out of the compounds levy scheme. The ACP determination is also not disputed by them. Therefore, we see no reason to interfere with the impugned order and accordingly uphold the same and reject this appeal.
11. M/s/C.V. Steels – Appeal No.E/2660/99-NB
The assessees opted out of the compounded levy scheme vide letter dated 7.4.98; hence, w.e.f. 1.5.98, they will be governed by the provisions of Section 3(A)(4) read with Rule 96ZO(1). The appellants do not dispute the method of determination of annual capacity of production for the period prior to the date of opting out. Hence, we remand this case to the Commissioner for determination of the actual production under Section 3(A)(4) of the Act read with Rule 96ZO(1) of the Rules.
12. M/s.Shree Jagadambay Castings P.Ltd. – E/2339/99-NB
The assessees accept the ACP determination for the period when they were covered by the compounded levy scheme under Rule 96ZO(3) of the Rules. However, they opted out of the above scheme vide letter dated 23.5.98; hence w.e.f. 1.6.98, their actual production will be determined by the provisions of Section 3(A)(4) of the Act read with Rule 96ZO(1) for which purpose, we remand the case to the Commissioner for fresh determination.
13. M/s.Panem Castings P.Ltd. – E/172/2000-NB
The assessee is stated to have opted out of the compounded levy scheme vide letter dated 16.1.98. The receipt of this letter is disputed by the Department. Therefore, the Commissioner is required to verify from the records as to whether the above mentioned letter was received by the Central Excise authorities and if on verification, it is found that such letter was submitted, then, w.e.f. 1.2.98, the Commissioner is to redetermine the actual production according to the provisions of Section 3(A)(4) of the Act read with Rule 96ZO(1) for which purpose, we remand the case to the jurisdictional Commissioner. There is no dispute relating to the ACP determination for the period during which the assessee was covered under the provisions of Rule 96ZO(3).
5. The Commissioner shall pass fresh orders after extending a reasonable opportunity to the assessees of being heard and putting forth their defence.
6. The appeals are disposed of in the above terms.
7. [Operative part of the order announced in open court]