CEA No.2 of 2009 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH CEA No.2 of 2009 DATE OF DECISION: March 19, 2010 COMMISSIONER OF CENTRAL EXCISE, LUDHIANA ...PETITIONER VERSUS M/S SURINDRA STEELS ROLLING & GENERAL ...RESPONDENT MILLS, MALERKOTLA CORAM: HON'BLE MR. JUSTICE ASHUTOSH MOHUNTA. HON'BLE MR. JUSTICE MEHINDER SINGH SULLAR. PRESENT: MR. PUNEET BASSI, ADVOCATE FOR THE PETITIONER. MR. JAGMOHAN BANSAL, ADVOCATE FOR THE RESPONDENT. ASHUTOSH MOHUNTA, J.(ORAL) The Revenue has filed this appeal impugning the order dated 4.10.2007, passed by the Customs, Excise & Service Tax Appellate Tribunal, New Delhi (for short 'the Tribunal'), vide which it has been held that if there is change of parameters with regard to annual capacity then Rule 5 of the Annual Capacity Determination Rules (for short 'the Determination Rules) shall not be applicable and the duty would be leviable on the basis of actual capacity. In the present case, the respondents are operating Hot Steel Re- rolling Mill Unit at Malerkotla and are engaged in the manufacture of Hot Re-rolled products of non-alloy steel which were chargeable to duty in terms of Section 3A of the Central Excise Act, 1944 (for short 'the Act') CEA No.2 of 2009 -2- read with Notification No.31/97-CE(NT) dated 1.8.1997. The Commissioner of Central Excise, Chandigarh fixed the production capacity of the Hot Steel Re-rolling Mill with the respondent at 8490.815 MT per annum, provisionally, under Rule 5 of the Determination Rules. Because of dismantling of one unit of Re-rolling Mill, the capacity came down and accordingly a request was made by the respondent to declare the parameters to redetermine the annual capacity to 5976.715 MT. In view of the changed parameters, the annual capacity was redetermined and it was found that capacity has actually come down to 3106.460 MT. But, despite the capacity having been reduced, the annual capacity was determined on the basis of Rule 5 of the Determination Rules. The Commissioner who was the adjudicating authority in this case, applied Rule 5 of the Determination Rules and determined the capacity of the respondent at 5559.810 MT. This order was challenged by the respondent before the Tribunal which has accepted its appeal. Counsel for the appellant has submitted that once the capacity of the respondent-Mill stood determined then they were liable to pay duty on the redetermined capacity, despite the fact that the capacity of the manufacturer had come down. On the other hand, counsel for the respondent submits that as one of the units of the respondent had been dismantled and closed down and the capacity of the plant had been considerably reduced, therefore, the respondent was liable to pay duty on the actual capacity of production and not on the basis of Rule 5 of the Determination Rules. Learned counsel for the respondent has placed reliance on Commissioner of Central Excise, Chandigarh-I vs. Doaba Steel Rolling CEA No.2 of 2009 -3- Mills, reported as 2002 (139) ELT 285 (P&H), wherein it has been held as under:- “It is the admitted position that the capacity for the year 1996- 97 was fixed on the basis of the parameters adopted by the respondent at the relevant time. Subsequently, the parameters were altered. In view of the change in parameters, it is the admitted position that the capacity was considerably reduced. In fact, it has not been disputed that the annual production had come down from 11961.135 Metric Tons to 7328.425 Metric Tons. This having happened, the Revenue could not have claimed Excise duty for the capacity which was not in existence. The provisions of Rule 5 cannot be invoked in a cae where after the determination of the capacity for the year 1996-97, the Unit makes a change in the capacity and the production actually comes down. If such a course were permitted, the result would be grossly unfair.” In the present case, the appellant has contended that the following questions of law arise for adjudication:- “(a) Whether in case of change/reduction in parameters mentioned in Sub-rule (3) of Rule 3 of the Hot Re- rolling Steel Mills Annual Capacity Determination Rules, 1997, Rule 5 could be invoked for demanding duty? (b) Whether the provisions of Sub-rule(2) of Rule 4 are mandatory and have to be complied with before making any change in the installed machinery or any part CEA No.2 of 2009 -4- thereof which tends to change the value of either of the parameters d, n, e and I mentoned in Sub-rule (3) of Rule 3 of the Rules? (c) Whether in case of non-compliance of Sub-rule(2) of Rule 4 of the Rules by the manufacturer, Rule 5 would be applicable?” As far as question (a) is concerned, we are of the considered opinion that as there was a change in reduction in the parameters mentioned in sub-Rule 3 of Rule 3 of the Determination Rules, therefore, the respondent is liable to pay the duty on the basis of actual production. The present case is squarely covered by the decision in Doaba Steel Rolling Mill's case (supra). In view of the above, this question is answered in favour of the assessee and against the Revenue. As far as questions (b) and (c) are concerned, intimation had been given by the respondents to the Department with regard to change in the parameters of annual capacity and on the basis of the same, the capacity of the plant was redetermined and was substantially reduced. Hence, there is sufficient compliance of sub Rule 2 of Rule 4 of the Determination Rules. Moreover this was not even disputed before the adjudicating authority or the Tribunal. In view of the above, we find no merit in the appeal and the same is dismissed. (ASHUTOSH MOHUNTA) JUDGE March 19, 2010 (MEHINDER SINGH SULLAR) Gulati JUDGE