Customs, Excise and Gold Tribunal - Delhi
Surindra Steel Rolling Mills vs Commissioner Of C. Ex. on 4 April, 2003
Equivalent citations: 2003(155)ELT175(TRI-DEL)
ORDER
P.S. Bajaj (J), Member
1. The above captioned appeals have been filed by the appellants against the common Order-in-Appeal dated 8-2-2000 vide which the Commissioner of Central Excise had ordered the finalisation of their annual capacity on the basis of Pusher Type Furnaces under the Hot Re-rolling Steel Mills Annual Capacity Determination Rules, 1997.
2. The appellants are engaged in the manufacture of iron and steel products classifiable under Chapter 72 of the Central Excise Tariff Act. In September, 1997, they filed declaration under Rule 96ZP(4) of the Central Excise Rules, 1944 wherein parameters of rolling mill were declared for determination of annual capacity in terms of Hot Re-rolling Steel Mills Annual Capacity Determination Rules, 1997 (hereinafter in short referred to as 'Rules, 1997'). They also declared the type of furnace as Batch Type. Before filing this declaration in the year 1996-97, they had two rolling mills wherein the total production of both the rolling mills was 12,401 MT. But, on introduction of compound levy scheme, the appellants decided to operate only one rolling mill at a time, for which only one furnace, one electrical motor and one fly wheel was installed. This fact was also declared by them in their declaration dated 19-12-1997 the Commissioner vide order dated 1-12-1999 determined the nature of the furnace as pusher type on the basis of report of the Superintendent. In respect of two rolling mills, the Commissioner determined the capacity as per Rule 5 of the Rules by taking into account actual product of both the rolling mills during the year 1996. Those orders were challenged by the appellants and the same were set aside. Thereafter, through the impugned order, the Commissioner has determined the nature of the furnace installed in the mill of the appellants. He has also determined the annual capacity as per Rule 5 of the Rules.
3. In Appeal No. E/1168/2000-NB(S), the orders of the Commissioner determining the nature of the furnace as Pusher Type has been questioned, whereas in Appeal No. E/1169/2000-NB(S) besides questioning the nature of the furnace, the appellants have also disputed the finalisation of the capacity as per Rule 5 of the Rules. In both the appeals, the appellants have also raised the issue that no demand could be raised without service of notice under Section 11A of the Act.
4. I have heard both sides. In both these appeals common issues involved are two; firstly, whether recovery could be ordered in the absence of issuance of show cause notice under Section 11A of the Act; and secondly, whether furnace installed in the mill of the appellants is Batch Type or Pusher Type. An additional issue involved in A. No. E/1169/2000-NB (S), is whether Rule 5 of the Rules of 1997 could be invoked for determining the annual capacity of the mill of the appellants.
5. So far as the first issue is concerned, the same stands already covered against the appellants by the decision of the Larger Bench in the case of Mohinder Steels Ltd. v. CCE, Chandigarh, 2000 (145) E.L.T. 290 (T-LB) = 2002 (52) RLT 669, wherein it has been ruled that no notice under Section 11A of the Act is required to be issued for recovery of duty under the Compound Levy Scheme. The argument of the Counsel that the said judgment of the Larger Bench is sub judice before the Apex Court in SLP and as such cannot be applied, is wholly misconceived and cannot be accepted. The operation of the judgment has not been stayed by the Apex Court and as such the same holds the field. In the face of that judgment of the Larger Bench of this Tribunal, it is difficult to accept that service of notice under Section 11A of the Act is essential before effecting the recovery of the duty under the Compound Levy Scheme from the appellants. The first issue, therefore, stands decided against the appellants.
6. Then comes the second issue, which is the most material one. According to the appellants, the furnace installed in their rolling mills is Batch Type, whereas the stand taken up by the Department is that it is a Pusher Type. The perusal of the impugned order shows that the Commissioner has based his findings regarding the nature of the furnace as Pusher Type solely on the report of the Superintendent of Central Excise who was appointed by him to verify the nature of the furnace. It is also evident from that order that in all 53 assessees including the appellants were party before the Commissioner whose nature of the furnace installed in their respective rolling mills, was in dispute. The nature of the furnace in the mills had been determined as Pusher Type by the Commissioner, through this very impugned order on the basis of the report of the Superintendent. The Superintendent as is born out from the record, inspected furnaces of all the 53 assessees, installed in their rolling mills including the present appellants, in one go and submitted the common report/single report that the furnaces installed were Pusher Types on the ground that the furnaces had machines which charged the material and the material also moved inside the furnace. But when cross-examined, he did not dispute in the case of the appellants that the base of the furnace was stationary and there was no movement of the material inside the furnace during the heating of charged material. He also did not dispute that charging machine, which he claimed as Pusher Mechanism, was placed outside the furnace by the appellants and not inside for moving of the material during the heating. Therefore, the report of the Superintendent in these circumstances could not be taken as conclusive evidence for holding that the furnace installed in the rolling mills of the appellants, was Pusher Type.
7. The bare perusal of the Rules of 1997 which deal with the furnace and rolling mills for the purpose of determination of annual capacity, shows that two types of furnaces i.e. Batch and Pusher Types; and two categories of rolling mills i.e. high speed and low speed mills, are taken into account while determining the annual capacity. The furnace is always used for heating the material which goes to the rolling mill for re-rolling purposes. The Batch Type furnace will be always slow in heating because the material is heated therein batchwise. Whereas the Pusher Type furnace will be always high capacity furnace wherein the material is heated continuously and keeps on moving. This being the distinction between the two types of furnaces, the Batch Type furnace can only work with the slow speed rolling mill, while the Pusher Type with the fast speed rolling mill. In the instant case, there is no material on the record to suggest that the mill of the appellants is fast rolling mill rather it had not been disputed that their mill is slow/low speed rolling mill. That being so, the only Batch Type furnace and not Pusher Type, could be used by them for running the mill. The Superintendent on whose report the Commissioner has passed the impugned order, did not even go into this aspect of the matter. He did not examine as to whether the Pusher Type furnace could work with the slow/low speed rolling mill or not. Even when he was cross-examined in this regard, he did not offer any satisfactory explanation and simply stated that he was appointed to determine the only type of furnace and not the type of rolling mill. For determining the type of furnace, he was required to see the type of rolling mill also which the appellants were having. When their mill was slow/low speed, it could only work with the batch type furnace and not pusher type.
8. The appellants even submitted Chartered Engineer certificate along with a declaration wherein Chartered Engineer confirmed that there was no movement of the material inside the furnace of the appellants during the heating and that the furnace is Batch Type. He prepared his report dated 26-11-1997 after verifying the working of the furnace on 25-11-1995. This report of the Chartered Engineer has been without any sufficient cause over looked and ignored by the Commissioner. His report rather being in conformity with the Trade Notice dated 17-10-1997 issued by the Commissioner of Central Excise, Chandigarh and as such could not be ignored. The report of the Superintendent which he prepared in respect of the furnaces of all the 53 assessees in one go, including the present appellants, could not at all be accepted as conclusive proof in the light of the facts and circumstances, discussed above, for determining the nature of the furnace as Pusher Type. Rather, from the facts and circumstances and material brought on record, it is evident that the furnace of the appellants is Batch Type. Therefore, the second issue regarding the nature of the furnace which is common in both the appeals, is decided in favour of the appellants.
9. This takes me to the third issue which is additional issue only in Appeal No. E/1169/2000-NB(S). The Commissioner has determined the annual capacity of the appellants by applying Rule 5 of the Rules by taking into account the actual production of both the rolling mills during the year 1996-97. His order in this regard, cannot be legally sustained. On introduction of the Compound Levy Scheme, the appellants decided to operate only one rolling mills at a time and for which they installed one furnace, one electric motor and one fly wheel. The mechanical set up was thus changed by them under which only one rolling mill could be operated, at a time. The Board also vide Circular No. 345/40/97-TRU, dated 26-2-1999 clarified that if a unit has one heating furnace with two rolling mills, then the capacity of the higher of the two mills should be taken as the assessee's annual capacity for the unit. Therefore, in the face of this Board's Circular, the annual capacity of the higher of the two mills, could be taken into account only and not of the both mills independently, for determining the annual capacity of the appellants. In this context, reference may also be made to the ratio of the law laid down by the Tribunal by following the above said Board's Circular in the case of Shri Khodiyar Rolling Mills v. CCE, Rajkot - 2002 (147) E.L.T. 250 and Channy Enterprises v. CCE, Chandigarh-I - 2002 (140) E.L.T. 549, wherein such a view has been taken. The Commissioner had overlooked the ratio of the law laid down in both these cases and the clarification issued by the Board in the above said circular. He has wrongly applied Rule 5 instead of Rule 3 of the Rules to the case of the appellants for determining the annual capacity. His order, in this regard, cannot be legally sustained and is to be set aside.
10. In view of the discussion made above, the impugned order of the Commissioner (Appeals) in both the appeals is set aside and the appeals of the appellants are accordingly allowed with consequential relief, if any, permissible under the law.