Allowed

The Commissioner , Customs and Central Excise, v. M/s. Sifco Metal Industries

Telangana HC3 Dec 2014CEA/39/2004

Case brief

AI extract

What is this about?

The Tribunal allowed an appeal determining the annual capacity of a steel mill. This court set aside the Tribunal's order, relying on a subsequent Supreme Court judgment, and confirmed the Assessing Officer's order determining the capacity at 3784.48 MTs.

What did the court decide?

The order dated 02.01.2004 of the Tribunal is set aside; the order dated 07.02.2002 of the Assessing Officer is confirmed. No order on costs.

The Commissioner , Customs and Central Excise, Vs… — Writ and Judicial Review | Telangana HC (2014)

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*** THE HON’BLE SRI JUSTICE L.NARASIMHA REDDY**

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AND

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THE HON’BLE SRI JUSTICE CHALLA KODANDA RAM

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+ C.E.A.No.39 of 2004

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%Date: 03.12.2014

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#The Commissioner, Customs and Central Excise, Hyderabad. …appellant. and $ M/s. Sifco Metal Industries, Hyderabad.

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…Respondent.

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! Counsel for appellant: Sri Gopala Krishan Gokhaley ^ Counsel for Respondent : Ms.K.Prabhavathi

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< GIST:

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> HEAD NOTE:

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? Cases referred 1. 2002 (52) RLT 884 (Guj.) 2. 2011 (269) ELT 298 (SC)

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THE HON’BLE SRI JUSTICE L.NARASIMHA REDDY AND

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THE HON’BLE SRI JUSTICE CHALLA KODANDA RAM

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C.E.A.No.39 of 2004

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JUDGMENT: (Per the Hon’ble Sri Justice L.Narasimha Reddy)

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A small issue pertaining to the determination of the annual capacity of Hot Re-rolling Steel Mill, for the financial year 1998-99, became the subject-matter of three successive appeals, before the Tribunal and equal number of orders in original, mostly because of lack of proper application of mind, and the passing of orders in a cryptic and summary manner. Bestowing of little more attention, would have given quietus to the issue, long back.

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The respondent is a Hot Re-rolling Steel Mill. Excise duty is payable on the quantity of steel manufactured by it from time to time. The Government of India framed the Hot Re-rolling Steel Mills Annual Capacity Determination Rules, 1997 (for short ‘the Rules’), in exercise of power under Section 3A of the Central Excise Act, 1944 (for short ‘the Act’). Rule 3 prescribes several parameters to be taken into account, in the process. Rule 4 provides for determination of the capacity for any part of the year, on prorata basis. Rule 5 is to the effect that in case the annual capacity of a Mill determined under Rule 3 is found to be less than the actual production of the Mill during the financial year 1996-97, the determination under Rule 3 shall be deemed to be equal to the actual production of the Mill during 1996-97.

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The actual production of the respondent – Mill during the financial year 1996-97 was found to be 3784.48 Metric Tonnes (MTs). Obviously because the determination under Rule 3 of the Rules, was yielding a lesser figure, the concerned authority determined the annual capacity of the Mill, at 3784.48 MTs, through order, dated 30.10.1998.

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The respondent submitted a representation, dated 10.12.1998, stating, inter alia, that the figures pertaining to financial

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year 1996-97 were incorrectly furnished and that two important factors, namely inclusion of scrap of 145.33 MTs. and change of parameters in production, were not taken into account. The representation was rejected and that led to filing of an appeal before the Customs, Excise and Gold (Control) Appellate Tribunal (CEGAT). The matter was remanded by the CEGAT and the Assessing Officer was directed to pass fresh orders. On such orders being passed, the matter was once again taken to CEGAT, and for the second time, the matter was remanded. Ultimately on 07.02.2002, the Assessing Officer passed an order determining the annual capacity of the respondent – Mill at 3784.48 MTs., by deducting the quantity of scrap of 144.88 MTs. The said order was challenged before the Customs, Excise & Service Tax Appellate Tribunal, Bangalore (for short ‘the Tribunal’), feeling aggrieved by the denial of relief on the basis of change of parameters, once again by the respondent. Through order, dated 02.01.2004, the Tribunal allowed the appeal, by placing reliance upon the judgment of the Gujarat High Court in Gujarat Steel & Agrico Industries v. Union of India^[1] . The same is challenged in this appeal filed under Section 35(G) of the Act by the Department.

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Heard Sri Gopala Krishna Gokhaley, learned counsel for the appellant, and Ms.K.Prabhavathi, learned counsel for the respondent.

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Neither the facts are in serious dispute, nor the provision of law is of any complexity. What was required to be done was only to correlate the undisputed facts to the relevant provisions of law.

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The Rules came into force in the year 1997. Earlier to that, the duty was being levied, as and how the product was despatched from the factory or the annual capacity was determined on the basis of certain other parameters. Consequent upon the framing of Rules,

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the annual capacity of the respondent-Mill was taken up.

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Rule 3 of the Rules prescribes the formula to be followed in this behalf. Obviously to protect the interests of Revenue, Rule 5 thereof mandates that, in case the annual capacity determined under Rule 3 is found to be less than the actual production of the Mill during the financial year 1996-97, the latter figure shall be treated as a capacity determined under the Rules itself.

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The respondent did not feel any grievance, when it furnished the figures pertaining to the financial year 1996-97, or the same was taken note of in the process of determination. Only when it emerged that the figure that emerged on application of Rules is less than the actual production of the year 1996-97, a representation was made by raising two objections. The first was that the figures pertaining to 1996-97 included the scrap to an extent of 144.88 MTs., and that some changes of parameters, which have bearing upon the production capacity, were also introduced in the Mill. Omitting the rounds of litigation that have taken place till the latest of the orders were passed, it emerges that the fact that the scrap was included in the figures pertaining to 1996-97 was taken note of and deduction to that effect was made. Therefore, the first grievance of the respondent stood addressed.

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The other grievance was that the changes of the parameters introduced in the machinery, would have their own effect upon the production. It is not in dispute that any change in parameters of a re-rolling mill would become relevant or acceptable only on being certified by the Department. Admittedly, no such certification has taken place. In Commissioner of Central Excise, Chandigarh v.

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Doaba Steel Rolling Mills^[2] , the Hon’ble Supreme Court held that Rule 5 of the Rules cannot be ignored, in the context of

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determination of the annual capacity. Obviously because the judgment was not in existence when the appeal was decided by the Tribunal, the same was not taken into account.

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We, therefore, allow the appeal and set aside the order, dated 02.01.2004 passed by the Tribunal. As a result, the order, dated 07.02.2002 passed by the Assessing Officer determining the annual capacity of the Mill for the financial year 1997-98 at 3784.48 MTs., shall stand confirmed. There shall be no order as to costs.

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The miscellaneous petitions filed in this appeal shall also stand disposed of.

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____________________ L.NARASIMHA REDDY, J.

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_____________________ CHALLA KODANDA RAM, J.

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Date:03.12.2014 L.R. copy to be marked. GJ

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[1] 2002 (52) RLT 884 (Guj.)

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[2] 2011 (269) ELT 298 (SC)

The Commissioner , Customs and Central Excise, v. M/s. Sifco Metal Industries

Case brief

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The Commissioner , Customs and Central Excise, v. M/s. Sifco Metal Industries

Case brief

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