M/S. Shalimar Ispat vs C.C.E. Raipur

[Arising out of Order-In-Appeal No. I(Gen) Ch. 72/96Z/11/98/CX dated: 23.05.2003 passed by CCE Raipur]

For approval and signature:

Honble Mr. Rakesh Kumar, Member (Technical)

Hon'ble Mr. S.K. Mohanty, Member (Judicial)

1 Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2 Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3 Whether Their Lordships wish to see the fair copy of the Order?

4 Whether Order is to be circulated to the Departmental authorities?

M/s. Shalimar Ispat ...Appellant

Vs.

C.C.E. Raipur Respondent

Appearance:

Ms. Rajesh Rawal (Advocate) for the Respondent

Mr. M S Negi, DR for the Appellants

CORAM:

Honble Mr. Rakesh Kumar, Member (Technical)

Hon'ble Mr. S.K. Mohanty, Member (Judicial)

Date of Hearing.29.05.2015

Date of Decision.25.06.2015

Final Order No. 52004 /2015_

Per S K Mohanty:

The present appeal has come up for hearing pursuant to the judgment dated 12.01.2015 of the Hon'ble Supreme Court delivered in the case of the appellant itself in Civil Appeal No.407 of 2015 [S.L.P. (c) No. 22266 of 2014], wherein, while setting aside the orders passed by this Tribunal in appeal and the orders passed by the Hon'ble High Court in Writ/Review petitions, the Hon'ble Apex Court have directed this Tribunal to proceed with the hearing on merits of the case, without being influenced by any kind of concession that was given at the earlier point of time. Hence, without considering the earlier orders passed on the disputed issue, the appeal is being taken up for hearing.

2. Background of the case, leading to this appeal, are summarized herein below :-

2.1 Section 3A was inserted in the Central Excise Act, 1944 w.e.f. 14.05.1997, which enables the Central Government to charge Central Excise duty on notified goods on the basis of annual capacity of production of the rolling mills. In exercise of the powers conferred by sub-section (2) of Section 3A of the said Act, the Central Government vide Notification No. 23/97-C.E. (N.T.) dated 25.07.1997 framed and notified "Hot Rerolling Mills Annual Capacity Determination Rules, 1997" (for short, referred to as the "Rules, 1997"), effective from 01.08.1997. The Rules,1997 prescribed the formula for determination of the annual capacity of production of Hot Rolling Mills on the basis of information to be furnished by the mill to the jurisdictional Central Excise officer. The said Rules, 1997 were famed, containing the rules from 1 to 4.

2.2 However, by Notification No. 45/97-C.E. (N.T.) dated 30.08.1997, the Rules, 1997 were amended w.e.f. 01.09.1997. The effect of the amendment was that Rule 5 was inserted after sub-rule (2) of Rule 4, which reads as under:-

"5. In case, the annual capacity determined by the formula in sub-rule (3) of rule 3 in respect of mill, is less than the actual production of the mill during the financial year 1996-97, then the annual capacity so determined shall be deemed to be equal to the actual production of the mill during the financial year 1996-97."

2.3 In the light of amending notification dated 30.08.1997 (supra), the jurisdictional Commissioner of Central Excise asked for certain information vide letter dated 04.09.1997, which were provided by the appellant vide its letter dated 15.09.1997. In the said letter, the appellant inter alia, stated that though rolls of 210 mm Dia was originally installed in the factory, but due to some problem, the capacity of the said Dia rolls was changed in April' 1997, and in its place, 185 mm Dia rolls was installed. Vide the said letter, the appellant requested the Central Excise authorities to determine the capacity of the mill on the basis of 185mm Dia and not to assess the capacity on the basis of previous year production, since the amending notification dated 30.08.1997 came at a later date, after installation of the said rolls in April' 1997.

2.4 Based on the correspondence exchanged between the Central Excise department and the appellant, the Commissioner vide order-in-original dated 8.6.2001 determined the annual capacity of the appellants as 6054 MT, as while the capacity determined on the basis of the formula prescribed in sub rule (3) of Rule 3 of the Capacity Determination Rules, 1997 by taking the nominal centre distance as 195 MM was 3613 MT, the actual production during 1996-1997 was 6054 MT and accordingly the Commissioner held that in view of Rule 5 of the Capacity Determination Rules, 1997, the annual capacity of production would be 6054 MT. Against the above order of the Commissioner, the appellant filed the appeal before the Tribunal. The Tribunal vide final dated 16.01.2002 set aside the Commissioners Order dated 8.6.2001 and remanded the matter back to the Commissioner for redetermination of the annual capacity of production of the appellant in the light of Larger Bench judgment of the Tribunal in the case of Sawanmal Shibumal Steel Rolling Mills vs CCE Chandigarh-I [2001 (127) ELT 46].

2.5 In de novo proceedings the Commissioner vide Order-in-original dated 23.5.2003 by taking the nominal centre distance as 195 MM and invoking Rule 5 of the Capacity Determination Rules, 1997, once again determined the annual capacity of production as 6054 MT based on the actual production during 1996-1997 as the production during 1996-1997  6054 MT was higher than the production determined in terms of formula prescribed in Rule 3(3) of the Capacity Determination Rules.

2.6 Being aggrieved by the above order of the Commissioner, the appellant filed appeal before the Tribunal. The Tribunal vide final order dated 18.04.2006 reported in 2006 (206) ELT 294 held that Rule 5 of the Capacity Determination Rules, 1997 is not applicable to the present case and the duty was required to be paid on the basis of capacity of production worked out in terms of the formula in Rule 3(3) and accordingly the Tribunal held that annual Capacity of Production is 3613 MT and hence there is no short levy. The Tribunal, thus, allowed the appeal filed by the appellant.

2.7 Against the above order of the Tribunal, the Department filed an appeal before Honble Chhattisgarh High Court (Tax Case No. 39/2006). Honble High Court disposed of the said appeal vide order dated 11.10.2012 by which the matter was remanded to the Tribunal with observation that Honble Apex Court in the case of CCE vs Doaba Steel Rolling Mills reported in 2011 (269) ELT 298 SC had occasion to interpret the aforesaid Rule 5 of the Capacity Determination Rules, 1997 which decision was rendered after the impugned order passed by the Tribunal. In Pursuance of the above order of the High Court this matter was heard again.

3. Heard both the sides.

4. Sh. GL Rawal Sr. Advocate and SH. Rajesh Rawal, Advocate, the Ld. Counsels for the appellant made the following submissions.

(1) The change in parameter d (nominal centre distance) from 210 MM to 185 MM was made in April 1997 while before the Capacity Determination Rules, 1997 came into operation w.e.f. 1.8.1997. In the Capacity Determination Rules, 1997, which came into operation w.e.f. 1.8.97, there was no Rule 5. Rule 5 was inserted in these Rules by Notification No. 45/97-CE (NT) dated 30.8.1997 w.e.f. 1.9.1997. Hence the said Rule 5 is not applicable to the instant case and the annual capacity of the appellant is required to be worked out in terms of the formula contained in Rule 3(3) without applying Rule 5, as the appellant had made the required declaration regarding their parameters in terms of Rule 3(1) of the Capacity Determination Rules, 1997 on 18.08.1997. Since the required declaration under Rule 3(1) of the Capacity Determination Rules had been made prior to 1.9.1997 when Rule 5 was not there, this Rule cannot be invoked. During the period prior to 1.9.97 the annual capacity determination or production was to be determined only on the basis of the formula prescribed in Rule 3(3) and there was no provision that if actual production during 1996-1997 was more than the capacity of production determined under Rule 3(3). It is the actual production during 1996-1997 which would be taken as annual capacity of production. Since such a provision came w.e.f. 1.9.1997, the same cannot be applied in those cases where the declaration for determination of annual capacity of production was made during period prior to 1.9.1997.

(2) The Apex Court in the case of Doaba Steel Mills has held that from the language of Rule 5 it is evident that where annual capacity is determined under Rule 3(3), Rule 5 springs into action. However in the instant case the change in parameter was admittedly made in April 1997 before the Capacity Determination Rules came into operation and accordingly in the facts of the instant case, Rule 5 is not applicable.

5. Sh. M S Negi, the Ld. DR, defended the impugned order by reiterating the findings of the Commissioner and pleaded that the issue involved in this case stands decided in favour of the Department by the Apex Courts judgment in the case of Doaba Steel Rolling Mills (supra). He also pleaded that as is clear from the Commissioners Order the annual capacity of production determined is with effect from 1.9.1997 when Rule 5 was already in operation and, therefore, irrespective of when the declaration/ parameters was made Rule 5, would be applicable.

6. We have considered the submissions from both the sides and perused the records. The appellant are a rolling mill and the period of dispute in the present case is from September 1997 to March 2000. By a Notification No. 32/97-CE (NT) dated 18.8.1997 issued under Section 3A(2) of the Central Excise Act, 1944, the Central Government notified Hot Rerolling Steel Mills Annual Capacity Determination Rules, 1997 which came into force w.e.f. 1.8.1997. These rules provided for determination of annual capacity of production of a rolling mills and on that basis, the monthly duty liability on the basis of a formula as prescribed in this Rules. Rule 3(3) of these Rules prescribed the formula for determination of annual capacity of production on the basis of various parameters, one of which was D i.e. nominal centre distance of the pinions in the pinion stands in millimeter. Rule 3(1) provided that a hot rolling mill shall declare the value of d, n, i and Speed of rolling, the parameters referred to in sub Rule (3) to the Commissioner of Central Excise with a copy to Assistant Commissioner.

Sub Rule (2) of Rule 3 provided that on receipt of the declaration regarding parameters received from the assessee, the Commissioner shall get the parameters verified for their correctness. Sub rule (3) of Rule 3 prescribes the formula for determination of annual capacity of production on the basis of the parameters d, n, i and speed of rolling. Sub rule 4(2) provides for change in parameter by the assessee which could be made by intimating the Jurisdictional Commissioner in advance about the proposed changes to be made. In the Capacity Determination Rules effective from 1.8.1997, there was no Rule 5 and the Rules provided for determination of annual capacity of production only on the basis of formula prescribed in Rule 3(3) which was based on certain parameters  d, n i and speed of Rolling to be declared to the Commissioner in terms of Rule 3(1). It is only by another notification issued under section 3A(2) that the Capacity Determination Rules, 1997, were amended by adding Rule 5 which provided that - If in case the annual capacity determined by the formula in sub Rule (3) of Rule 3 in respect of a mill is less than the actual production of the mill during the financial year 1996-1997, the annual capacity shall be deemed to be equal to the actual production of the mill during the financial year 1996-1997.

Thus in terms of the amended Capacity Determination Rules, is in force w.e.f. 1.9.1997, if the actual production in the year 1996-1997 was higher than the annual production determined on the basis of the formula prescribed in Rule 3(3), it is the actual production during 1996-1997 which shall be deemed to be the annual capacity of production. The Apex Court in the case of Doaba Steel Rolling Mills (supra) considered the question as to whether sub Rule 4(2) of the Capacity Determination Rules is to be read with Rule 5 ibid, or in other words, when after initial determination of the capacity of production of an assessee on the basis of the parameters declared by him under Rule 3(1), the assessee changes the parameters resulting in lesser capacity of production, whether Rule 5 would be applicable and the Apex Court answered this question in affirmative holding that Rule 4(2) has to be read with Rule 5. The Apex Court in para 16,17, & 18 held that language of Rule 5 is clear and unambiguous in the sense that in a case where annual capacity is determined/ re-determined by applying the formula prescribed in sub Rule 3(3), Rule 5 springs into action and has to be given full effect to and the conclusion becomes inevitable that Rule 5 would be attracted for determination of annual capacity of production of a factory when any change in the installed machinery or any part thereof is intimated to the Commissioner in terms of Rule 4(2) of the said Rules.

The Apex Court, however, in this judgment has not gone into the question as to whether Rule 5 would be applicable in those cases where the necessary declaration for determination of annual capacity of production in terms of sub Rule (1) of Rule 3 had been made during period prior to 1.9.1997 when Rule 5 was not there. In the present case the declaration about parameters in terms of Rule 3(1) had been made on 18.8.1997. The nominal centre distance had already been changed from 210 MM to 185 MM in April 1997 i.e. prior to coming into force of the Capacity Determination Rules, 1997 and as such, this is not a case of change of parameters in terms of Rule 4(2). Since Rule 5 had been introduced w.e.f. 1.9.1997 by notification no., 45/97-CE (NT) dated 30.08.1997, in our view this cannot be given retrospective effect when the notification itself makes it effective w.e.f. 1.9.1997. Therefore, in our view, Rule 5 would not be applicable to the cases where the declaration under Rule 3(1) declaring the parameters for determination of annual capacity of production had been made to the Commissioner during period prior to 1.9.1997.

An assessee who had made this declaration during period prior to 1.9.1997 would be entitled for determination of his annual capacity of production on the basis of the Capacity determination Rules as the same existed during that period. Since there is no dispute that in the present case the declaration under Rule 3(1) had been made on 18.8.1997, Rule 5 would not be applicable and as such the Apex Courts Judgment also in the case of Doaba Steel Rolling Mills (supra) would not be applicable. In view of this, the impugned order is not sustainable. The same is set aside. The appeal is allowed.

(pronounced in the open court on 25.06.2015)

(S. K. Mohanty) (Rakesh Kumar)

Member(Judicial) Member(Technical)

Neha

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