By TIOL News Service

JAIPUR 29, JULY, 2013: THIS reference is made by the Commissioner of Central Excise, Jaipur-I, seeking a direction from this Court to the Customs, Excise and Gold (Control) Appellate Tribunal to state and refer following question to this Court under Section 35H of the Central Excise Act, 1944:-

“Whether the redetermination of Annual Capacity of Production in view of the facts that the assessee had suppressed the actual production capacity at the time of fixing annual capacity production will tantamount to review of its own order by the Commissioner?”

The High Court noted that the question that calls for consideration by this court is whether Central Excise Commissioner has the power to redetermine annual capacity of production. In other words, can the Commissioner redetermine annual capacity of production induction furnace/crucible installed in the factory premise of the assessee by enhancing the same from 9600 MT to 10848 MT in terms of sub-rule (1) of Rule 3 of the Rules of 1997.

The High Court observed,

Rule 3(3) of the Rules of 1997 clearly provides that the annual capacity of production of ingots and billets of non-alloy steel in respect of such factory shall be determined by applying the formula given in the said Rule. That would mean that if the formula is applied to wrong information furnished by the assessee , it will result in incorrect annual capacity of production being determined.

The Commissioner in the present case was justified in making redetermination because he round additional and further evidence which substantiated his belief that earlier determination was based on concealment of facts or at-least incorrect capacity of furnace provided by the assessee.

Section 11A of the Act of 1944 specifically confers powers on the Central Excise Officer to determine duty where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, for any reason, other than the reason of fraud or collusion or any wilful misstatement or suppression of facts or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty.

So, the High Court was of the view that the matter gives rise to a debatable and significant question of law.

Therefore the High Court directed the Tribunal to state and refer following question under Section 35H of the Central Excise Act, 1944 to this court.

Whether the Commissioner having once determined the Annual Capacity of Production, can, on discovery of new and additional evidence/material, which the assessee failed to disclose or suppressed, can redetermine the same?

So, now the CESTAT is required to state and refer the above question to the High Court, within 120 days. Thereafter, the High Court will again hear the matter and give its opinion and send it back to the Tribunal. Then the Tribunal will give its order on the appeal based on the High Court's findings. And this order can be again appealed to the High Court.

Why all this protracted litigation? Why can't the High Court decide the issue without asking the Tribunal to refer the matter to the High Court? Well that was the LAW. Fortunately, Section 35H is not a valid statute now; it applies only to orders passed before 1st July 2003.

(See 2013-TIOL-585-HC-RAJ-CX)