IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH G.C.R. No.1 of 2004 Date of decision:19.01.2009 M/s N.K.H.Alloys, V&PO, Jandiali, Chandigarh Road, Ludhiana. ...Petitioner versus Commissioner of Central Excise, Commissionerate-I, Chandigarh ....Respondent CORAM: HON'BLE MR. JUSTICE M.M.KUMAR HON'BLE MR. JUSTICE H.S.BHALLA Present: Mr. Jagmohan Bansal, Advocate for the petitioner. Mr. Kamal Sehgal, Advocate for the respondent. 1. Whether Reporters of local papers may be allowed to see the judgment? Yes. 2. To be referred to the Reporters or not ? Yes. 3. Whether the judgment should be reported in the Digest? Yes. M.M.KUMAR, J. On a petition filed under Section 35 H(1) of the Central Excise Act, 1944, by the Assessee, this Court has issued directions on 27.11.2001 to the Customs, Excise and Service Tax Appellate Tribunal (for brevity 'the Tribunal') to state facts of the case and refer the G.C.R. No.1 of 2004 - 2 - following questions of law for determination of this Court:- 1. Whether the excise duty on goods not actually manufactured can be levied and collected Under Rule 96ZO of the Central Excise Rules, 1944 when the duty is levied under Section 3 of the Central Excise Act, 1944 on the goods produced or manufactured. 2. Whether duty of excise can be levied and collected simply on account of failure of Applicant to strictly comply procedural requirement. At the hearing, we find that the aforesaid questions have already been answered in favour of the Assessee and against the revenue by two two Division Benches of this Court in the cases of 'Commissioner, Central Excise Commissionerate, Ludhiana versus M/s Shiv Durga Ispat, Ludhiana (Punjab) (CEA No.63 of 2006, decided on 27.10.2006) and Commissioner of Cental Excise, Ludhiana versus Ralson India Ltd. -2006 (202) E.L.T. 759 (P & H). In order to appreciate the controversy in hand, few facts may be noticed. The petitioner is engaged in the manufacturing of Steel Ingots and Steel casting. Under Section 3-A of the Central Excise Act, 1944, the Government has power to levy and collect duty on any product according to the production capacity of the Assessee. The scheme is known as 'Compounded Levy Scheme' which was introduced w.e.f. 01.08.1997 by including manufacturer of Steel Ingots and Billets. A G.C.R. No.1 of 2004 - 3 - notification in that regard dated 01.08.1997 read with Rule 96ZO of the Central Excise Rules, 1944 was issued. The notification provided that if the factory remains closed for not less than 7 days, then the Assessee becomes entitled of abatement of duty in terms of Rule 96ZO (2). The Rule 96ZO(2) reads as under :- Where a manufacturer does not produce the ingots and billets of non-alloy steel during any continuous period of not less than seven days and wishes to claim abatement under sub-section (3) of Section 3A of the Central Excise Act, 1944 the abatement will be allowed by an order passed by the Commissioner of Central Excise of such amount as may be specified in such order, subject to the fulfilment of the following conditions, namely:- a) the manufacturer shall inform in writing about the closure to the Assistant Commissioner of Central Excise, with a copy to the Superintendent of Central Excise, either prior to the date of closure or on the date of closure. b) the manufacturer shall intimate the reading of the electricity meter to the Assistant Commissioner of Central Excise, immediately after the production in his factory is stopped along with the closing balance of stock of the ingots and billets of non-alloy steel; G.C.R. No.1 of 2004 - 4 - c) the manufacturer, when he starts production again, shall inform in writing about the starting of production to the Assistant Commissioner of C.E. with a copy to the Superintendent of Central Excise, either prior to the date of starting production or on the date of starting production; d) the manufacturer shall on start of production again along with the closing balance of stock on restarting the factory, intimate the reading of the electricity meter to the Assistant Commissioner of Central Excise, with a copy to the Superintendent of Central Excise; e) the manufacturer shall while sending intimation under clause (c), declare that his factory remained closed for a continuous period starting from -----hours on ----------(date) to ------hours on ------(date). The petitioner has claimed that the unit was closed by it on 16.01.1998 at 18 hours. In that regard, an intimation was sent on 16.01.1998 itself, which was duly acknowledged by the office of the Assistant Commissioner of Central Excise (P-1). The position of stock was also intimated on 17.01.1998. However, on account of inadvertence, it failed to intimate electricity meter reading (P-2). The electricity meter reading could be intimated only on 19.01.1998 (P-3) because the G.C.R. No.1 of 2004 - 5 - previous day 18.01.1998 was Sunday. It has also been found that the petitioner kept the unit closed till 31.01.1998. The Range Officer had visited their factory on 17.01.1998 and physically verified the stock. It is significant to notice that he also noted the meter reading in R.G.-I (relevant extracts P-4). The abatement claim made by the petitioner in respect of the period from 16.01.1998 to 31.01.1998 was rejected by the Commissioner of Central Excise Commissionerate, Chandigarh, on the ground that the meter reading was intimated with a delay of two days (P-5). The petitioner filed an appeal before the Tribunal and the claim made by the Tribunal was rejected by sustaining the ground taken in the order in original. The view of the Tribunal is discernible from the following portion of the operative para of its order dated 09.03.2001, which reads as under :- It is not in dispute that the electricity meter reading was not intimated by the Appellants on 16-1-98 when the production was stopped. The subsequent intimation of the electricity meter reading cannot be treated as compliance with the requirement of Rule 96ZO(2)(b). Accordingly the Commissioner was justified in dis-allowing the abatement for the period 16-1-98 to 31-1-98. We have heard learned counsel for the parties at a considerable length and find that for an insignificant lapse on the part of the Assessee-petitioner, the abatement claim has been rejected which is G.C.R. No.1 of 2004 - 6 - not sustainable in the eyes of law. It would be appropriate to read Section 3 of the Act which is as under :- There shall be levied and collected in such manner as may be prescribed :- a) a duty of excise on all excisable goods which are produced or manufactured in India as, and at the rates, set forth in the First Schedule to the Central Excise Tariff Act, 1985. b) a duty of excise on all excisable goods which are produced or manufactured in India as, and at the rates, set forth in the First Schedule to the Central Excise Tariff Act, 1985. c) a special duty of excise, in addition to the duty of excise specified in clause (a) above, on excisable goods specified in the Second Schedule to the Central Excise Tariff Act, 1985 which are produced or manufactured in India, as and at the rates, set forth in the said Second Schedule. A perusal of the aforesaid provisions makes it evident that duty could be levied on the goods produced or manufactured in India. In the instant case, it has not been disputed that the unit was lying closed. The Range staff has visited the unit and confirmed the closure on 17.01.1998, which was in response to the intimation given by the petitioner on 16.01.1998. The meter reading has been noted by the Range staff which is evident from the reading of their note dated 17.01.1998. The reading noted by the Range staff is 799370 KWH on G.C.R. No.1 of 2004 - 7 - 17.01.1998. On 19.01.1998, the Assessee had also intimated the meter reading to be 799365 KWH as on 16.01.1998. When the aforesaid reading is compared with the reading intimated by the petitioner on 19.01.1998, as on 16.01.1998 at 18 hours, the unit is shown to have consumed only five units. It is not possible to contemplate that with five units the petitioner could have indulged in any production. There was no question of any production and consequently, no duty could be imposed. Therefore, we find that the answer to the questions posed has to be in favour of the Assessee-petitioner and against the revenue. The opinion on the aforesaid questions has already been expressed in favour of the Assessee in M/s Shiv Durga Ispat (supra) and Ralson India Ltd. (supra). The matter stands disposed of in the above terms. (M.M.KUMAR) JUDGE (H.S.BHALLA) JUDGE 19.01.2009 sanjeev