2004 (96) ECC 451 (Tri)

CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL

New Delhi -- Bench-NB(C)

Shri S.S. Kang, Member (J) and Shri K.D. Mankar, Member (T)

Bhawani Shanker Castings Ltd.

Versus

CCE, Chandigarh

Appeal No. E/1335/2002/NBC

[Arising out of Order-in-Original No. 1/CE/CHD-II/2002 dated 22.2.2002 passed by the Commissioner of Central Excise, Chandigarh-II]

Final Order No. 274/2004/NBC, dt. 1.4.2004, Certified on 5.4.2004

Duty Demand

Notified goods -- Statistical data of the production extracted from the appellants own record revealed that, since the appellants were predominantly manufacturing the goods notified under Section 3A of the Act, the duty liability thereon, has to be discharged in terms of provisions of Section 3A -- Appellants required to discharge the duty liability on the notified goods in accordance with the capacity fixed by the Commissioner -- Dispute raised by the appellants to apportion the capacity used in the manufacture of non-notified goods, also is without any substance since the scheme of discharge of duty liability u/s 3A does not provide for making such adjustments -- In the event, payment of duty on the basis of fixation of capacity was commercially not a profitable propositions, the appellants had the chance to make the payment of duty on the basis of actual production -- But the said option could have been exercised only after the completion of financial year. -- CER, Rule 96ZO(3) -- CEA, 1944, Section 3A.

PRESENT :

Shri Sudhir Malhotra, Adv. for the appellant.

Shri Charul Baranwal, SDR for the respondent.

Cases Cited :

1. CCE v. Cotspun Ltd., 2000 (69) ECC 451 (SC)................................................. [Para 3]

2. Gian Mahtani v. State of Maharashtra, 1999 (110) ELT 400 (SC)........................ [Para 3]

3. Oudh Sugar Mills Ltd. v. UOI, 1978 (2) ELT J172 (SC)...................................... [Para 3]

4. Supreme Steel & General Mills, 2001 (78) ECC 225 (SC).................................. [Para 1]

5. Venus Casting (P) Ltd., 2000 (69) ECC 1 (SC).......................................... [Paras 1 & 8]

Per : K.D. Mankar

The appeal of the appellants is directed against the Order-in-Original passed by the Commissioner. The facts in brief are as under:

"The appellants, M/s. Bhawani Shankar Casting Ltd. Vill. Raowali, Jalandhar operating an induction furnace of 3 MT capacity and manufacturing non-alloy steel ingots, filed an application dated 23.9.97 giving their option to work under Rule 96ZO(3) of Central Excise Rules, 1944 (the Rules for short). The Commissioner Central Excise vide order dated 22.9.98, determined the annual capacity of production of the unit as 9600 MT in terms of Notification No. 24/97-CE(NT) dated 25.7.97 read with Section 3A of the Act. Accordingly, the appellants were required to pay duty of Rs. 5 lakhs per month, through account current as per Rule 96ZO(3) of the Rules.

In the meantime, the appellants vide their letter dated 15.1.98 made submissions to the Commissioner, that they have obtained an order worth Rs. One crore for supply of steel casting to Rail Coach Factory, Kapurthala, and that they would ordinarily be producing Steel Casting and may also produce M.S. Steel Ingots and be discharging their duty liability w.e.f. 16.1.98 under normal procedure prescribed under Section 3 of the Act and would be paying excise duty @ 15% adv. After availing modvat credit on inputs.

The appellants had also challenged the duty liability determined by the department in the High Court vide CWP No. 15310/99, and the court in its judgment dated 29.9.99 directed the Commissioner, to dispose the application of the appellants afresh after affording an opportunity of personal hearing to them.

Under Order-in-Original dated 22.2.2002 the Commissioner observed that, the Hon'ble Supreme Court in the case of M/s. Venus Casting (P) Ltd., 2000 (69) ECC 1 (SC) : 2002 (117) ELT 273 (SC) & M/s. Supreme Steel & General Mills, 2001 (78) ECC 225 (SC) : 2000 (133) ELT 513 (SC) had held that the two procedures namely one under sub-Section (4) of Section 3A of Central Excise Act and the other under sub-Rule (3) of Rule 96ZO of Central Excise Rules are alternative procedures and the assessee has to opt for one and once having done so he cannot claim the benefit of the other.

The Commissioner has further observed that as per Notification No. 30/97-CE(NT) dated 1.8.97 if a manufacturing unit ordinarily produces Castings or Stainless Steel products but also incidentally produces non-alloy Steel ingots and Billets, the provisions of Section 3A shall not apply to that unit and duty may be chargeable from that unit under the provisions of Section 3 of Central Excise Act, 1944. It was found that, during the period 15.1.98 to 31.3.98, the party produced 674.850 MT ingots and 372.220 MT castings i.e. the notified goods were produced in predominance and the unit could not be considered to have worked under Section 3 of the Act. Thus, it has been held that party and worked under Section 3A under compounded levy scheme from 1.9.97 to 31.3.98.

In view of the above facts, the Commissioner rejected the appellant's claim and ordered the appellants to pay duty in terms of order dated 22.9.98 for the period from 1.9.97 to 31.3.98 under the provision of Section 3A of the Act, and from the period from 1.4.98 to 31.3.2000 under Section 3 of the Central Excise Act, 1944 as per the rate specified for the period".

2. Heard both sides.

3. The appellants are seeking the quashing of the order, by placing reliance on the judgment of the Hon'ble Supreme Court in the case of CCE v. Cotspun Ltd., 2000 (69) ECC 451 (SC) : 1999 (113) ELT 353 (SC), claiming that the classification/modvat credit declaration filed by them has neither been controverted/objected nor any review show cause notice was issued by the department. The appellants filed classification and modvat declaration under Rules 173B and 57G respectively on 16.1.98. The Ld. Commissioner erred in demanding duty in respect of non-alloy steel ingots (sub-heading 7206.90) under Section 3A as per the capacity determined by the department vide letter No. V(72)/30/26/Chd-II/TU/97/1133 dated 22.9.98 ignoring the production of castings and duty payment thereon under Section 3 ibid during the period 16.1.98 to 31.3.98. It is incorrect to demand duty on the production capacity determined under Section 3A on notified goods i.e. non-alloy steel ingots ignoring the production of non-specified goods and payment of duty thereon under Section 3 on non-notified goods. The demand of duty beyond the production capacity of the furnace is bad in law. The claim for modvat entitlement was not considered. The direction of the Commissioner to pay duty under Section 3A for the period 16.1.98 to 31.8.98 without considering the show cause notice dated 23.4.98 is bad in law. The impugned order is passed on the basis of assumptions and presumptions, which are incorrect and bad in law. They placed reliance on the Supreme Court judgments in the case of Oudh Sugar Mills Ltd. v. UOI, 1978 (2) ELT J172 (SC) and Gian Mahtani v. State of Maharashtra, 1999 (110) ELT 400 (SC) in support of the above submissions.

3. It has been urged that, the duty paid amount under Section 3A, may be scaled down, by giving basement for the capacity utilized for the manufacture of castings. Modvat be allowed on castings manufactured during the period from 16.1.98 to 31.3.98.

4. We note that the facts as enumerated above are not in dispute. The show cause notice extracts the figures of production as under:

Sl. No. | Period | PRODUCTION | C.I. Casting in MTs, Non-alloy steel ingots in MTs
(1) | (2) | (3) | (4)
(i) | 16.1.98 to 31.1.98 | 81.100 | 226.745
(ii) | Feb 98 | 162.715 | 257.845
(iii) | March 98 | 148.165 | 190.260

5. However, in the appeal memorandum the appellants have furnished different figures. For figures in Column (3), the appellants have furnished the figures of 77.195 MTs, 223.790 and 223.050 respectively Sl. No. (i), (ii) & (iii) while these in Column (4) furnished figures are 247.989 MTs, 274.120 MTs & 201.775 MTs. However, on going through the copies of the RT-12 returns it is revealed that, the figures of production have been correctly taken by the departmental authorities. Hence, we hold that the grievance of the appellants on this point is without any basis.

5. So far as the main challenge to the order is concerned, the point to be decided is, as to whether or not, the appellants could be considered to be a manufacturer, manufacturing goods which are notified under Section 3A. The adjudicating authority has, on the basis of information extracted relating to the production held that, the appellants have produced notified goods in predominance during the period from 15.1.98 to 31.3.98, whereas the position for the subsequent period was that the production of non-notified goods viz., castings was predominant. Therefore, it was held that, the provision of Section 3A of the Act, will not applicable from 1.4.98 onwards, but the same were applicable for the period from 1.9.97 to 31.3.98.

6. So far as the subject of opting out of the scheme is concerned, Hon'ble Supreme Court has already decided that, within the same financial year, the manufacture of notified goods do not have an option to opt out of the scheme. It is obvious in this case that, the appellants opted for the scheme vide their letter dated 12.8.97 and vide their letter dated 16.1.98 they declared that they wanted to opt out.

7. The statistical data of the production extracted by the Commissioner, from the appellant's own record revealed that, since the appellants were predominantly manufacturing the goods notified under Section 3A of the Act, the duty liability thereon, has to be discharged in terms of provisions of Section 3A. We do not see any contrary documentary evidence to find fault with this finding. Accordingly, we hold that the appellants were required to discharge the duty liability on the notified goods in accordance with the capacity fixed by the Commissioner.

8. The dispute raised by the appellants to apportion the capacity used in the manufacture of non-notified goods, also is without any substance since the scheme of discharge of duty liability under Section 3A does not provide for making such adjustments. In the event, payment of duty on the basis of fixation of capacity was commercially not a profitable proposition, the appellants had the chance to make the payment of duty on the basis of actual production. But the said option could have been exercised only after the completion of the financial year i.e. from 1.4.98 onwards as held by the Hon'ble Supreme Court in the case of M/s. Venus Casting (supra). This benefit viz., duty payment on actual production basis, already stands extended to the appellants by the Commissioner in the impugned order. So far as the period prior to 1.4.98 is concerned, no such benefits can be extended in terms of the legal provisions of the Scheme. We, see therefore, no merits in the said submissions and the same are accordingly rejected.

9. In the light of the fact that the goods, namely, "steel castings" are not notified under Section 3A, the same are required to be assessed to duty (under Section 3) in terms of regular procedure, outside the provisions of Section 3A. The appellants are required to discharge the excise duty of Rs. 7,61,696 demanded in the show cause notice, on this part of the production after availing the facility of the modvat in accordance with the law. However, we note that in the order passed by the Commissioner, there is no finding regarding payment of this duty by the appellants and the impugned order only confirms the payment of duty in terms of capacity fixed under the provisions of Section 3A. Accordingly, we hold that since there is no order confirming this duty, in the absence of any cross appeal from the department against this deficiency, the appellants are not required to make the said payment and their appeal on this part becomes infructuous.

10 Since no other issues are raised, we hold that the order passed by the Commissioner deserves to be sustained and the appeal of the appellants is liable to be rejected. Accordingly, we reject the appeal.

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