1. In this Appeal, filed by M/s. Om Metals & Minerals Ltd., the issue involved is whether their capacity of production is to be redetermined under the provisions of Section 3 A of the Central Excise Act.
2. Ms. Reena Khair, learned Advocate, submitted that the Appellants manufacture iron and steel ingots which were liable to Central Excise duty @ Rs. 750 Per MT calculated on the annual capacity of production determined under the Induction Finance Annual Capacity Determination Rules, 1997; that the Commissioner, Central Excise, determined their annual capacity at 9600 MT per annum against which their Appeal was allowed by the Tribunal vide Final Order No. A/844/99 NB dated 9.9.99 directing the Commissioner to redetermine the annual production capacity afresh after granting a reasonable opportunity of hearing; that the Commissioner redetermined the annual capacity of production as 9600 MT which was again remanded by the Appellate Tribunal vide Final Order Nos. A/787-88/2000 NB dated 5.9.2000 for redetermination of the annual capacity of production and the abatement claimed; that the Commissioner, under the impugned Order, has again determined the capacity at 9600 MT, rejecting their request for redetermination of annual capacity of production in terms of Sub-section (4) of Section 3 A of the Central Excise Act relying upon the judgments in the case of CCE v. Venus Casting (P) Ltd. and UOI Steel & General Mills and holding that the Appellants had not disputed the total capacity of the furnace which is 3 MT as per their declaration and the invoice submitted by them and that they were simply asking determination of the capacity on the basis of average production of last years and abatement to the extent of production of castings which was not expressly permissible under the law.
3. The learned Advocate, further, submitted that the Appellants, apart from manufacturing steel ingots, also manufacture castings; that since they are having a common power connection, induction furnace and CR Mill cannot run at one time and are used alternatively; that further induction furnace was not operated at full capacity for all three shifts; that by a subsequent letter dated 2.9.1997, they informed the Assistant Commissioner about the common connection and not using full capacity of the induction furnace; that in their letter dated 4.10.97 addressed to the Commissioner, they indicated the figures of manufacture of casting during the preceding four financial years and mentioned that their overage annual production of steel was under 2600 MT and requested the Commissioner to re-determine their annual production; that they had also given the details of the production during the relevant period i.e. from September 1997 to March 1998 in their letter after the Tribunal had remanded the matter for fresh adjudication vide Order dated 5.9.2000 and had requested for determination of production in terms of Sub-section (4) of Section 3A of the Act. She also contended that Sub-section (4) provides that where an assessee claims that the actual production is lower than the production determined under the Rules, the Commissioner will determine the actual production and re-determine the amount of duty payable; that they satisfy all the requirements of Sub-section (4) of Section 3A and accordingly Commissioner was required under the law to determine the actual production and the duty with reference to such production. The learned Advocate finally submitted that the decisions in Venus Castings and Supreme Steel are not applicable as the issue considered therein was whether a manufacturer who has exercised his option to make payment based on capacity under Sub-rule (3) of Rule 96ZO of the Central Excise Rules, 1944 may make an application for determining the actual production under Section 3A(4) of the Act; that the Supreme Court has held in Venus Casting case that manufacturers who have not opted for Rule 96ZO(3) would be covered by Section 3A(4); that as the Appellants have not opted for the special procedure in Rule 96ZO(3) and have always been operating under Sub-rules (1) and (2) of Rule 96ZO, they remain eligible for Sub-section (4) of Section 3A.4. Countering the arguments, Shri M.P. Singh, learned Departmental Representative, reiterated the findings as contained in the impugned Order and emphasized that the Appellants cannot change the option during the same financial year as held by the Apex Court in the case of UOI v. Supreme Steel and General Mills and as such demand confirmed for the period from 1.9.97 to 31.3.98 on the basis of Annual Capacity of production is justified.
5. We have considered the submissions of both the sides. This Tribunal vide Final Order No. A/844/99-NB dated 9.7.99 had remanded "the matter for fresh determination of Annual Capacity of Production of the Appellants' furnace, after considering their representation and after extending to them a reasonable opportunity of being heard in person." When the matters again came before the Tribunal after redetermination of the Annual Capacity of Production, the matters were again remanded vide Final Order Nos. A/787-88/2000 NB dated 5.9.2000 for passing "appropriate Order in accordance with law after extending reasonable opportunity of being heard in person. The order should be passed for determination of Annual Capacity of Production as well as abatement claimed by the assessee." It is the case of the Appellants that they have never opted for payment of duty under Rule 96ZO(3) of the Central Excise Rules, 1944 at all and have always worked under Rule 96ZO(1) and as such they are entitled to get their production redetermined under the provisions of Sub-section (4) of Section 3 A of the Central Excise Act which reads as under: (4) Where an assessee claims that the actual production of notified goods in his factory is lowerthan the production determined under Sub-section (2), the Commissioner of Central Excise shall, after giving an opportunity to the assessee to produce evidence in support of his claim, determine the actual production and redetermine the amount of duty payable by the assessee with reference to such actual production at the rate specified in Sub-section (3).
6. We agree with the submissions of the learned Advocate that the ratio of the judgment of Supreme Court in Venus Castings is not applicable to the facts of the present matter as the Appellants have never opted to discharge the duty liability in terms of the provisions of Sub-rule (3) of rule 96 ZO. It has been held by the Supreme Court in the said judgment as under: The scheme contained in Section 3A(4) of the Act and Rule 96ZO(3) or Rule 96ZP(3) of the Excise Rules are two alternative procedures to be adopted at the option of the assessee. Thus the two procedures do not clash with each other. If the assessee opts for procedure under Rule 96ZO(1) he may opt out of the procedure under Rule 96ZO(3) for a subsequent period and seek the determination of annual capacity of production. An assessee cannot have a hybrid procedure of combining the procedure under Rule 96ZO(1) to which Section 3A(4) of the Act is attracted.
Therefore, it is made clear that the manufacturers, if they have availed of the procedure under Rule 96ZO(3) at their option, cannot claim the benefit of determination of production capacity under Section 3A(4) of the Act which is specifically excluded.
6.3 It is thus apparent that if the manufacturers have not opted for Rule 96ZO(3), they can claim the benefit of determination of production capacity under Section 3A(4) of the Act. This is clear also from the following observations of the Supreme Court in Para 8 of the judgment in Venus Castings ease which is as under: Under the scheme evolved in this provision the annual production capacity of mills and furnaces is determined by the Commissioner of Central Excise in terms of the Rules to be framed under Section 3A(2) of the Act by the Central Government. Thereafter, the assessee would be liable to pay duty based on such determination. If the annual production capacity determined by the Commissioner is disputed by the assessee, the Commissioner is required to re-determine the same as provided in Section 3A(4).
7. In view of this, the Commissioner is required to determine the actual production and redetermine the amount of the duty payable by the Appellants who have claimed that the actual production of notified goods in his factory is lower than the production determined under Sub-section (2) of Section 3A. It is not required that the Appellants should submit any evidence to the effect that they have reduced the capacity of the furnace. There is no force in the submissions of the learned Departmental Representative that the Appellants cannot ask for redetermination during the same financial year since there is no such restriction provided in Sub-section (4). The decision of the Supreme Court in Supreme Steel case was also in respect of Switch over from choosing to pay duty under Rule 96ZO(3) to actual production basis under Section 3A(4) of the Act. It has been held by the Supreme Court in Supreme Steels case that it was absolutely optional for the manufacturer to opt for payment of duty under Rule 96ZO(3) and he "cannot opt twice during one financial year first choosing to pay in accordance with Sub-rule (3) of Rule 96ZO and thereafter to switch over to actual production basis under section 3A(4) of the Act." Accordingly we set aside the impugned Order and remand the matter to the Commissioner with the direction to determine the actual production and redetermine the amount of duty payable in terms of Sub-section (4) of Section 3A of the Central Excise Act.