Judgment:
Per: P.G. Chacko
This appeal filed by the assessee is directed against determination, by the Commissioner, of their annual capacity of production (ACP, for short) and the consequential demand of duty. The appellant was engaged in the manufacture of hot re-rolled products of iron and steel during the material period. These products were specified for compounded levy under Section 3A of the Central Excise Act and the relevant Rules framed thereunder. According to the Compounded Levy Scheme, the manufacturer was required to declare the parameters of his mill to the Commissioner and the latter was, after verification, required to determine the ACP in terms of the prescribed formula given under the Hot Re-rolling Steel Mills Annual Capacity Determination Rules, 1997 (hereinafter referred to as 'the 1997 Rules'). The appellant had declared the parameters of their hot re-rolling mill to the Commissioner on 28.8.1997. On 8.9.1997, they received information from the Assistant Commissioner (Tech.) that the Commissioner had provisionally fixed their ACP at 3000 MTs. On 15.9.1997, the appellant informed the Commissioner in writing that the ACP provisionally determined by the latter was beyond their control considering the actual production for the preceding three financial years, 1994-95, 1995-96 and 1996-97. On 29.9.1997, the appellant informed the Commissioner that they would be availing the option of paying an amount of Rs.300/- per ton towards full and final discharge of duty liability under sub-rule (3) of Rule 96ZP of the Central Excise Rules, 1944. On the same day, they also conveyed to the Commissioner their intention to reduce the value of 'd' (nominal centre distance of the pinions in the pinion stand) from 190 mm (declared) to below 160 mm. They also informed the Commissioner that their factory would remain closed for 15 to 20 days from 1.10.1997 for the intended purpose. On 22.10.1997, the appellant informed the Commissioner that the factory would remain closed for a further period of upto 31.10.1997 to complete the necessary changes in the mill. Again, on 1.11.1997, the appellant informed the Commissioner that the work was incomplete and that the factory would remain closed upto 13.11.1997 for completion of the changes in the mill. On 13.11.1997, the appellant intimated completion of the change of parameter to the Commissioner and also apprised him of their intention to restart the mill from 16.11.1997. The appellant also requested for verification of the changed parameters and for re-fixation of the ACP. On 18.11.1997, the Deputy Commissioner (Tech.) asked the appellant not to restart production until the Commissioner's permission was obtained after verification of the changed parameters. Subsequently, there was again some correspondence on this aspect between the appellant and the Commissioner. Ultimately on 27.11.1997, the appellant obtained the Commissioner's permission to resume production with the changed parameter.
2. The Commissioner issued a show-cause notice on 10.12.1997 to the appellant for imposing penalty on them for not having taken prior permission for changing the parameter of the rolling mill. The appellant submitted their reply on 17.12.1997, wherein they narrated the chronology of events upto the grant of permission dated 27.11.1997 by the Commissioner and also pleaded that they were not aware of the requirement of having to take prior permission for effecting parametric changes in the mill. In that reply, the appellant also pleaded for exoneration from penal liability. The impugned order was passed in January 1998, wherein the learned Commissioner finalised the ACP for the period from 1.9.1997 to 21.12.1997 at 3265 MTs and also determined the ACP on the basis of revised parameters for the period 22.12.1997 to 31.3.1998 at 1018 MTs. On this basis, the production capacity for the two segments, viz. 1.9.1997 to 21.12.1997 and 22.12.1997 to 31.3.1998, was determined pro rata at 1000.56 MTs and 281.86 MTs respectively. In terms of the option exercised by the party under sub-rule (3) of Rule 96ZP, the Commissioner quantified their duty liability at Rs.3,00,168/- and Rs.42,279/- respectively for the periods 1.9.1997 to 21.12.1997 and 22.12.1997 to 31.3.1998. The party was asked to pay the duty with interest @ 18% p.a. for the delay of payment. The Commissioner's order further noted that, as the assessee had changed a parameter of their mill without prior approval from the Commissioner, they had become liable to penal action. Accordingly, the Commissioner imposed a penalty of Rs.5,000/- on the party under Rule 173Q after observing that they had not given any convincing reply for the lapse.
3. In the present appeal filed by the assessee, the first grievance raised by them is that any opportunity of personal hearing was not afforded by the Commissioner before passing the impugned order. The further grievance of the appellant is that the Commissioner erred in imposing the aforesaid penalty on them without considering the relevant circumstances of the case. The learned counsel, apart from reiterating the above grounds of the appeal, submits that the Commissioner ought to have granted abatement of duty for the period of closure of the mill. We have heard the learned JDR also, who has filed a chronology of events coupled with the department's comments. The learned JDR has also referred to certain decisions. He has particularly referred to the Tribunal's decision in Jay Mahakali Rolling Mills vs. CCE, Rajkot 2001 (136) ELT 1153 (Tri.-Mumbai), wherein the ACP determined by the Commissioner with effect from the date on which approval was given for change of parameter of the re-rolling mill was upheld by the Tribunal. It is submitted that the Tribunal's order was upheld by the Hon'ble High Court vide 2002 (143) ELT 279 (Guj.). It is also pointed out that the special leave petition filed by the party against the High Court's judgment was dismissed by the apex court. The thrust of submissions made by the learned JDR is that prior approval of the Commissioner for change of any parameter of a re-rolling mill is critical in the determination of ACP based on changed parameters. The learned JDR has also pointed out that no abatement of duty was ever claimed by the appellant in terms of Rule 96ZP(2) and also that any such relief has not been claimed in the present appeal. Though we have found a valid point in the submissions of the learned JDR, we are not in a position to sustain the Commissioner's order inasmuch as it was passed in gross violation of the principles of natural justice. It is not in dispute that any opportunity of being heard was not offered to the appellant by the Commissioner. Though the party filed a reply to the show-cause notice and this fact was taken note of by the Commissioner, nothing contained therein was considered. We have thus found a clear case of negation of natural justice. We, therefore, set aside the impugned order and allow this appeal by way of remand with a request to the learned Commissioner to take fresh decision on the ACP as also on the duty liability and penal liability (if any) to be discharged by the party. The case law cited by the learned JDR is open to be considered by the learned Commissioner. Needless to say that the party should be given a reasonable opportunity of being heard.
4. The appeal stands allowed by way of remand.