ORDER
Mrs. Archana Wadhwa
1. Briefly stated the facts of the case are as under:-
1.1. The appellants are engaged in the manufacture of M.S.Ingots falling under Chapter Sub-heading 7206.90 of Schedule to Central Excise Tariff Act, 1985. A the said goods are notified for the purpose of levy of duty of excise under the provisions of Section 3A of the Central Excise Act, 1944, based on the annual capacity of production in the manner as prescribed under the provisions of Rule 96ZO of the Central Excise Rules, 1944, the appellants’ annual capacity of production was determined by the proper officer in terms of the provisions of Induction Furnace Annual Capacity Determination Rules, 1997. The Commissioner of Central Excise, Jamshedpur vide his Order dated 23.3.98 fixed the annual capacity of production of the appellants’ furnace as 9600 MT, based upon the appellants’ declaration that the capacity of furnace was 3 M.T. For the said purpose, the appellants referred to the manufacturer’s invoice supported by a certificate from them certifying the capacity of the furnace to the tune of 3 M.T.
1.2. Subsequently, on a request made by the Revenue, National Metallurgical Laboratory, Jamshedpur (here-in-after referred to as NML) determined the capacity of the appellants’ furnace as 3.2 M.T. and the resultant annual capacity of production as 10,240 M.T. Accordingly, Revenue issued a show cause notice on 7.4.99 to the appellants proposing to revise their A.C.P. from 9600 M.T. to 10,240 MT and also raised the demand of duty of Rs.2,33,333.33 allegedly short-paid by the appellants during the period September, 1997 to March, 1998.
1.3. The said show cause notice was adjudicated upon by the Commissioner, vide his impugned Order confirming demand of duty against them, as proposed in the notice, and imposing personal penalty under Section 11AC along with confirmation of interest under Section 11AB. Penalty of Rs.10,000.00 was imposed under the provisions of Rule 173Q(1) and Rs.5,000.00 imposed under the proviso to Rule 96ZO(3). Plant and machinery, land, building belonging to the appellants were also confiscated with an option to them to redeem the same on payment of redemption fine of Rs.10,000.00.
2. The appellants have strongly challenged the above Order of the Commissioner. Shri B.N.Chattopadhyay, learned Consultant appearing for the appellants draws our attention to the provisions of Induction Furnace Annual Capacity Determination Rules, 1997. As per Rule 3 of the said Rules, the annual capacity of production shall be determined based upon the authenticated copy of the manufacturer’s invoice or trader’s invoice, who has supplied or installed the furnace. He also submits that inasmuch as the supplier’s invoice as also his certificate was placed before the Commissioner, based upon which the Commissioner had already fixed the annual capacity of production, re-fixation of the same by him based upon the same subsequent developments is not justified. He also submits that as per sub-rule (2) of Rule 3, other evidences have to be considered by the Commissioner only when the invoice of the manufacture of the furnace is not available. He also clarifies that the show cause notice was also issued to the supplier of the furnace who in his defence reply, has clarified that a furnace of capacity of 3 M.T. has been supplied to appellants and the result of NML calculating the furnace capacity as 3.2 M.T. is not correct inasmuch as they manufacture furnaces with capacity of 3 M.T., 3.5 M.T., 4 M.T. and 4.5 M.T. and so on. The supplier has clarified that they do not manufacture furnaces of capacity of 3.2.M.T. Shri Chattopadhyay, learned Consultant refers to the Tribunal’s decision in the case of Ganapati Industries vs. Commissioner of Central Excise, Kanpur reported in 2000 (122) ELT-405(T), wherein it was held that the capacity of Induction Furnace as shown in the invoice of the manufacturer/supplier has to be taken as the basis for determination of annual capacity. Explaining the reasons on account of which the expert results of M/s. NML showing the capacity 3.2 M.T. may be wrong, learned Consultant clarifies that the capacity of furnace depends upon the coil geometry as well as the crucible lining. The crucible lining is not an item supplied with the furnace and is normally made at the time of installation of the furnace at site and is subjected to wears and tears and is patched. The same is, further, re-lined several times through its operation. With the above explanation, the appellants contended that the side-assessment made by M/s. NML does not mention whether measurement has been made with fresh lining or with worn-out lining. He, further, submits that if the maximum safety tolerance limit is considered, the capacity of the furnace would be worked out to be 3 M.T., as clarified by the supplier of the furnace. He also submits that during the said period, their actual production was much less than the actual annual capacity determined by the Commissioner.
3. We have also heard Shri A.K.Chattopadhyay, learned J.D.R. for the Revenue, who reiterates the reasoning of the Commissioner.
4. After giving our careful consideration to the issue involved before us, we find that the dispute involved in the present appeal is re-determination of the annual capacity of production of the appellants’ furnace in terms of Induction Furnace Annual Capacity Determination Rules, 1997. The Commissioner, after carefully examining the capacity, had finally fixed the same as 9600 M.T., vide his Order dated 23.3.98. The appellants were discharging their duty liability in terms of the said final fixation of the annual capacity of production during the period involved in the present appeal i.e.September, 1997 to March, 1998. The said annual capacity of production was determined by the Commissioner in terms of Rule 3 of the Induction Furnace Annual Capacity Determination Rules, 1997, which lays down the manner and method of determination of the annual capacity of production. Sub-rule (1) requires the annual capacity of production to be determined, based upon the authenticated copy of the manufactuer’s invoice or trader’s invoice, who has supplied or installed the furnace and to ascertain the total capacity of the furnace on the basis of such invoice or document. Sub-rule (2) of Rule 3 is to the effect – “If the invoice or the document referred to in sub-rule (1) is not available for any reason with the manufacturer, then the Commissioner shall ascertain the capacity ….” A such, it is clear that sub-rule (2) is applicable only when sub-rule (1) is not available. In the present case, the appellants have undoubtedly produced on record the invoice of the supplier of the furnace along with a certificate which was produced when a requisition to that effect was made by the appellants’ jurisdictional Superintendent of Central Excise. The supplier in reply to the show cause notice has also clarified that the capacity of the furnace was 3 M.T. and they are not engaged in the manufacture of furnaces of the capacity of 3.2. M.T. They have also explained the reasons which might have resulted in wrong determination of the capacity of M/s. NML. However, as the manufacturer’s invoice is available, which is required to be taken as the basic document for the purposes of determination of annual capacity of production, in the absence of which only the Revenue can go to the other mode of determination of the annual capacity of production, we hold that the re-determination of annual capacity by the Commissioner in the facts and circumstances of the case was not justified.
4.1. We also find that vide Order dated 23.3.98, the Commissioner has also finally fixed the annual capacity of production, on the basis of which the appellants were discharging their duty liability. As such, to re-determine the annual capacity of production and to require the appellants to pay duty for the period from September, 1997 to March, 1998, vide show cause notice dated 7.4.99 issued beyond the normal period of six months, is neither justified nor warranted.
In view of the foregoing, Appeal No.E-53/2000 is allowed.
5. As regards Appeal No.E-54/2000, the appellants were directed by the Commissioner to place on record the proof of payment of duty of Rs.22.00 lakh, as required to be paid by them in terms of their actual production capacity determined by the Commissioner for the period from April, 1998 to 31.8.1998. The appellants have contended that though they have paid the said amount of duty, but their actual production was much less and their duty liability should be re-determined in terms of sub-rule (4) of Section 3A of the Central Excise Rules, 1944. They have also made a request to set aside the imposition of personal penalty of Rs.5000.00 under Rule 96ZO(3) of the Central Excise Rules, 1944.
6. After giving our careful consideration to the dispute, we find that the Tribunal in the case of Ganapati Industries reported in 2000(122)ELT-406 has, after considering the Honourable Supreme Court’s judgement in the case of Venus Casting Pvt. Ltd., observed that the appellants at any point of time during the financial year, can exercise their option to come out of the payment of duty on the basis of annual capacity of production and can opt for payment of duty on actual production capacity. However, in the instant case, it is not clear from the records as to whether at any point of time during the period in question, the appellants represented to the Revenue making an option for payment of duty on actual production. Accordingly, we set aside this portion of the impugned order and remand the matter to the Commissioner for fresh decision in the light of the law laid down by the Tribunal in the case of Ganapati referred supra.
Both the appeals are disposed of in the above terms.