M/S CHANNY ENTERPRISES versus COMMISSIONER OF CENTRAL EXCISE, CHANDIGARH

Citation: [2005] 3 S.C.R. 251 · Decided: 05-04-2005 · Supreme Court of India · Bench: RUMA PAL · Disposal: Dismissed

Judgment (excerpt)

A 
M/S CHANNY ENTERPRISES 
v. 
COMMISSIONER OF CENTRAL EXCISE, CHANDIGARH 
APRIL 5, 2005 
B 
[RUMA PAL AND C.K. THAKKER, JJ.] 
Excise: 
Central Excise Act, 1944-Section 3A-lnduction Furnace Annual C 
Capacity Determination Rules, 1997-Rules 3 and 4-Circular dated 26-2-
1998-Central Excise Rules, 1944-Rule 96(ZP)-Hot rolled steel products-
Levy of duty on the basis of Annual Capacity of Production(ACP)-Assessee 
having two rolling mills, each mill with a separate heating furnace-
Commissioner relying upon the 1998 Circular determining the ACP by clubbing D 
the capacity of both the mills-Correctness of-Held: Correct-The 1998 
Circular clearly says that the capacity of the higher of the two mills would be 
taken for assessing the ACP only if each rolling mill did not have a separate 
heating furnace-If each rolling mill had a separate heating furnace, then the 
capacity of the unit would be the sum total of the capacity of each rolling mill 
in the unit irrespective of the fact that only one mill operated at a time. 
E 
With effect from 1st September 1997, steel ingots and billets were 
notified under Section 3-A of the Central Excise Act, 1944 for levy of excise 
duty on the basis of Annual Capacity of Production (ACP) of the factory 
producing such goods. For determination of the ACP, the Induction 
Furnace Annual Capacity Determination Rules, 1997 were framed. In F 
answer to a query raised as to how would the ACP be determined if a 
unit has more than one rolling mill in the same premises but operates only 
one rolling mill at a time, it was clarified by Circular dated 26th February 
1998 issued by the Board that if a unit has one re-heating furnace with 
two rolling mills, then the higher capacity of the two mills should be taken G 
as the assessed annual capacity for the unit. However, if each rolling mill 
has a reheating furnace, the cap~city of the unit would be the sum total 
of the capacity of each rolling mill in the unit. 
Appellant has two mills in which it manufactures hot rolled steel 
251 
H 
252 
SUPREME COURT REPORTS 
[2005] 3 S.C.R. 
A products. Prior to 1st September 1999, it had one heating furnace and its 
ACP was fixed on "that basis. The appellant subsequently installed a second 
furnace but, according to the appellant, there was only one electric motor 
which meant that both the furnaces could not be operated simultaneously. 
Pursuant to the said change, the Commissioner on the basis of the 1~8 
B Circular determined the ACP of Appellant by clubbing the capacity of 
both the rolling mills. Appeal against the Commissioner's order being 
dismissed by CEGAT, Appellant filed Reference Petition under Section 
35-H (I) of the Act as wet! as a writ petition before High Court, which 
were dismissed. 
C 
In appeal before this Court the appellant contended that the formula 
for determination of the ACP was on the basis of one motor per unit; that 
therefore despite having two furnaces since there was only one motor 
which was common to both, in terms of the said Circular the capacity of 
the higher of the mills should have been taken as the ACP. Respondents 
however contended that the question of taking the higher capacity of the 
D two mills would only arise if there was one re-heating furnace. 
Dismissing the appeal, the Court 
HELD : 1. It is not the appellant's case that the 1998 Circular was 
incorrect. On the contrary it has been relied on to claim that the ACP 
E should have been determined with reference to the mill which had the 
higher capacity. The Circular in answer to a query which exactly reflects 
the issue in this case, clearly says that the capacity of the higher of the 
two .mills would be taken for assessing the ACP only if each rolling mill 
did not have a separate re-heating furnace. If each rolling mill had a 
F separate. heating furnace, as the appellant admittedly does, then the 
capacity of the unit would be the sum total of the capacity of each rolling 
mill in the unit irrespective of the fact that only one mill operated at a 
time. The language could not be plainer. What the appellant's argument 
overlooks is that the scheme did not operate on the basis of the actual 
production but on the capacity of the rolling mills to produce. There is 
G therefore no reason to differ.with the ~iew expressed by the Commissioner, 
CEGAT and the High Court. [255-E-H] 
Hindustan Ferodo Ltd. v. Collector of Central Excise, (1997) 89 ELT 
16(SC) and Aditya Steel Industries Ltd. v. CCE & C, Bhu

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