Duty on basis of installed capacity u/s 3(1) of CEA

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sonal (Querist)
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02 August 2010 1)If there are 2 factories of same manufacturer for the same product...n for 2 months one of his factory(all machines in tht factory) was not working..then will it be calculated proportionatly for tht factory or not???

2)If in the same factory 2 machines r installed for manufacture of 2 diff. products...n for some period,say,2 months machin 1 is not workin...then will d duty be given on proportionat basis.......

Avinash A. Pamnani

Avinash A. Pamnani (Expert)
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04 August 2010 in case of 1) - there is a provision; when factory is shut for more than 15 days then duty is calculated proportionately.
so duty will calculated for 10 months on factory which was closed for 2 months
but the same is to be intimated to concerned officer of excise of that jurisdiction.

Avinash A. Pamnani

Avinash A. Pamnani (Expert)
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11 August 2010 in case 2) yes the duty will be paid on proportionate basis.
the deemed annual production will be redetermined as factor of production (machinery) is altered.

sonal

sonal (Querist)
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11 August 2010 sir, is dis exemption of paying duty on proportionate basis per factory or per product???

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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21 July 2024 Under Section 3(1) of the Central Excise Act (CEA), duty is generally levied on the basis of the production capacity of a manufacturing unit. Here are the clarifications to your queries:

1. **Factory Not Operating for Two Months:**
- If one of the manufacturer's factories (all machines within that factory) is not operating for two months, the duty liability will not be calculated proportionately for that factory.
- Central excise duty is typically based on the production capacity of the factory as a whole. If the factory is temporarily non-operational due to maintenance, repairs, or any other reason, the duty liability remains based on the installed capacity of the factory. There is no provision to calculate duty proportionately for the period when the factory is not operating.

2. **Two Machines for Two Different Products:**
- If within the same factory, two machines are installed for manufacturing two different products, and one machine is not working for a period of two months, duty liability is still based on the production capacity of the factory, not on a proportionate basis per machine or product.
- Duty under Section 3(1) of the CEA is levied on the capacity of the factory to manufacture goods, regardless of whether all machines are operational at any given time. The duty is assessed based on the potential capacity of the factory as a whole, not on individual machines or products.

**Exemption and Duty Calculation:**
- There is no exemption from paying duty on a proportionate basis per factory or per product under Section 3(1) of the CEA.
- Duty liability is determined based on the installed capacity of the factory to manufacture goods, irrespective of temporary non-operation of machines or production for specific products.

In conclusion, duty under Section 3(1) of the Central Excise Act is calculated based on the production capacity of the factory as a whole. Temporary non-operation of machines or reduced production for certain products does not alter the duty liability, which remains linked to the overall installed capacity of the factory.

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