2026-VIL-1798-CESTAT-KOL-CE
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CENTRAL EXCISE CESTAT Cases

Central Excise - Determination of Annual Capacity of Production and applicable rate of duty under compounded levy scheme - Rule 96ZP(3) of Central Excise Rules read with Section 3A of Central Excise Act, 1944 - Appellant's Unit II opted to pay duty under Rule 96ZP(3) for re-rolled products of non-alloy steel and furnished the re-measured parameters, which were verified by the officers of the Department. The Appellant calculated the capacity on that basis, with the 'd' measurement within 160mm, and sought final determination at the lower rate. The Commissioner nevertheless finalised a much higher capacity without any break-up and confirmed the demand at the higher rate - Whether the Annual Capacity of Production was correctly determined and the Appellant was liable to duty at the rate applicable under Rule 96ZP(3) - HELD - The determination of Annual Capacity of Production was not made correctly by the Commissioner. It is required to be made on the basis of the verification made by the Assistant Commissioner and the Technical Expert, and on that basis the capacity of the rolling mill comes to the figure computed by the Appellant. Since the measurement of 'd' was within 160mm and the Appellant had declared to pay duty under Sub-rule (3) of Rule 96ZP, the lower rate specifically provided in that Sub-rule applies instead of the higher rate. As the determination of capacity by the Commissioner was not correct, the demand founded on it is not sustainable - The impugned order is set aside and the appeal is allowed - Liability to duty for the period of closure of factory and entitlement to refund of excess payment under compounded levy scheme - Rule 96ZP of Central Excise Rules - Unit II of the Appellant did not run after February, 1999 and the Unit I rolling mill ran only up to March, 1999, after which the factory was permanently closed with no production in either rolling mill. The demand was raised for a period of 31 months, whereas the Appellant contended that the factory had run for a shorter period and that excess duty had been paid - Whether duty is payable for the period when the factory was closed and whether the Appellant is entitled to refund of the excess payment - HELD - The rolling mills and the factory ran only for the period from 01.09.1997 to 31.03.1999, and thereafter the factory was permanently closed with no production. The demand for the entire period of 31 months, which includes the period of closure, is therefore not sustainable. The Appellant, having paid duty in excess of the amount payable for the period of actual running on the correct capacity and rate, is eligible for refund of the excess payment - The impugned order is set aside and the appeal is allowed - Adjudication beyond the scope of Show Cause Notice - Confirmation of demand on a capacity figure not proposed in SCN - The SCN proposed the demand on the basis of a particular Annual Capacity of Production finally determined by the Department. The Adjudicating Authority, without considering the reply to the SCN, arrived at a new figure of Annual Capacity of Production which was not mentioned in the SCN and confirmed the demand for 31 months - Whether the Adjudicating Authority could confirm the demand on a basis different from that set out in the SCN - HELD - The Adjudicating Authority has travelled beyond the scope of the SCN, which is not permissible in law. The demand confirmed on a figure of capacity that was not part of the SCN cannot be sustained, and on this ground alone the impugned order cannot be sustained. The impugned order is set aside and the appeal is allowed - Interest and penalty under Rule 96ZP of Central Excise Rules - Validity of provisions relating to interest and penalty under compounded levy scheme - Interest and penalty were imposed on the Appellant under Rule 96ZP in the proceedings relating to the compounded levy scheme - Whether interest and penalty can be sustained under Rules 96ZO, 96ZP and 96ZQ - HELD - The Hon'ble Supreme Court has declared the provisions pertaining to interest and penalty contained in Rules 96ZO, 96ZP and 96ZQ of the Rules to be ultra vires. Interest and penalty imposed under Rule 96ZP therefore cannot be sustained - The impugned order is set aside and the appeal is allowed.
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