M-S. PARAS SHIP BREAKERS LTD. v. COMMISSIONER OF CENTRAL EXCISE

Citation: [2007] 11 S.C.R. 419

Court: Supreme Court of India

Bench: S.B. SINHA, H.S. BEDI

Case summary

M-S. PARAS SHIP BREAKERS LTD. v. COMMISSIONER OF CENTRAL EXCISE.pdf

Judgment text

MIS. PARAS SHIP BREAKERS LTD. v. COMMISSIONER OF CENTRAL EXCISE OCTOBER 12, 2007 [S. B. SINHA AND HARJIT SINGH BEDI, JJ. ] ~-· Central Excise Act, 1944-ss. JA and 35G-Deemed annual production-Manner ofdetermination-Finding offact by Tribunal l against assessee-Appeal ofassessee dismissed by High Court- Correctness of-Held, correct as there was no question oflaw for consideration by the High Court. Appellant-assessee had installed an induction furnace. The Department sought to determine the deemed annual production of D Appellant-assessee in terms of Section 3A of the Central Excise Act, 1944 (broughtinto force w. e. f. 14-05-1987) takinginto consideration the capacity ofthe induction furnace when itwas first installedviz. 8M. T. Appellant-assessee contendedthat dueto unavailabilityofrequisite electrical energyfrom the State Electricity Board it had to subsequently bring down the capacity ofthe induction furnace to 4Yz M.

Ts and that the deemed annual production should be determined accordingly. A finding of fact was arrived at by the concerned authorities that the capacity ofthe said furnace was 8M. Ts and not4Yz M. Ts. Tribunaltoo arrived at a finding offact that no modification had been carried outin the capacity of the induction furnace. Appeal filed thereagainst was dismissed by High Court. Hence the present appeal. Dismissing the appeal, the Court HELD: 1. 1. The show cause notice was issued to the appellant by ,.. ,-' the respondenton the premise thatthe capacity ofthe induction furnace is in excess of 4. 5 MTs. The question as to whether in effect and substance the appellant had reduced the capacity ofthe said induction furnace or not is essentially a question offact. TheTribunal has passed a very detailed order. Ittookinto consideration all the contentions raised by the appellant.

Itis evident that on representation having been made by the appellant that the capacity ofthe furnace stood reduced, a Deputy Commissioner was deputed by the Department for the purpose of measurementand verification ofthe parameters offurnace. The officers ofthe Department had actually seen the melting capacityofthe furnace and'the average production. They took into consideration the actual production recorded in RGI registers. On verification ofthe relevant registers, it was found that the actual production recorded was nearer to the level of8 M. Ts. The rule no doubt provides for determining the annual capacity in case where manufacturer proposes to increase or decrease the capacity of the induction furnace but before the said authorities even the concerned Chartered Engineerwas examined, who in his statement, admitted that he had certified the capacity of the furnace on the basis ofthe documents produced and information made available to him by the appellant.

Itwas, therefore, evidentthat he had not carried out any physical verification ofthe furnace. According to the said witness, the actual production may vary from 10% to 20% of the capacity shown in the jointverification report. Even the officer of Mis. Furcon Consultancy Services, statedthatthe modification had been carried outin one crucible only buta certificatewas issued in respect of both the crucibles. The Tribunal, therefore, arrived at the finding that in fact no modification was carried out in the crucible of the said induction furnace. Various other circumstances which were relevant for p determiiaation ofthe issue, viz. , the conductofthe parties, had also been taken into consideration. [Para 10] [424-F, G, II; 425-A, B, C, D] 1. 2. Upon consideration ofall relevant facts, as a finding offact had been arrived at by the Tribunal, the High Court cannot be said to have committed any errorin passing the impugned judgment. [Para 13] [426-G] 1. 3.

In terms ofSection 35G ofthe Central Excise Act, the High h Court could entertain an appeal only if a question of law arose. No question oflaw having, thus, arisen for consideration before the High Court, the impugned judgmentdoes not sufferfrom any legalinfirmity. [Para 15] [427-C, D] CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4841 of 2007. From the final Judgment/Order dated 11. 2. 2005 ofthe High Court of Gujarat at Ahmedabad in Tax Appeal No. 427 of2004. •·· Gaurab Banerjee, D. N. Ray and Sumita Ray for the Appellant. Gopal Subramanium, A. S. G. , Devanish A. Mohta, P. V. Narasimhan and B. Krishna Prasad for the Respondent. The Judgment ofthe Court was delivered by S. B. SINHA, J. 1. Leave granted. 2. This appeal is directed against a judgment and order dated D 11. 02. 2005 passed by a Division Bench ofthe Gujarat High Court in Tax Appeal No.

427 of2004 whereby and whereunder the appeal preferred by the appellant herein from ajudgment and order ofthe Customs, Excise and Gold Control Appellate Tribunal dated 22nd May, 2003 as well as Miscellaneous order dated 6th February, 2004, was dismissed. 3. The issue involved in this appeal is as to how the deemed annual production in terms ofSection 3A ofthe Central Excise Act, 1944 which was brought into force with effect from 14. 05. 1987 should be determined. Appellant herein installed an induction furnace, the capacity whereofwas 8 M. Ts. It had asked the Gujarat State Electricity Board (Board) for ~ supply of 3000 KVA of electrical energy. The Board agreed to supply only 1900 KVA input ofpower. The said furnace was manufactured by Inductotherm (India) Ltd. Keeping in view the fact that the appellant could not obtain supply the requisite quantity ofelectrical energy, it thought of reducing the capacity ofthe said induction furnace.

According to it, the capacity was brought down to 4Yz M. Ts from 8 M. Ts. Appellant contends ,.. ,. -.. \ that the Department was informed thereabout. Allegedly, an inspection was carried out and the capacity ofthe said induction furnace was also noticed by the inspecting team. Despite the same, a show cause notice -{-y was issued as to why the deemed annual production should not be determined on the basis that the capacity ofthe said furnace was 8 M. Ts. A finding of fact was arrived at by the concerned authorities that the capacity ofthe said furnace was 8 M. Ts, and not 4Yi M. Ts. 4. Mr. Gourab Banerjee, learned senior counsel appearing on behalf ofthe appellant, would submit that the appellant had obtained a certificate from Mis. Furcon Consultancy Services to show that the possible capacity ... ofthe furnace was 4. 5 M.

T~- for melting steel and in view ofthe fact that the Board was not in a position to supply 3000 KVA at 11 KV to the Unit, the appellant had no other option but to reduce the capacity ofthe said furnace. In this connection, our attention has been drawn to the following letter dated 16. 07. 1997 issued by the Board: "In connection to your letter cited above regarding increase in power requirement from 2400 KVA to 3000 KVA at 11 KV to your unit to Khakhariya, it is informed you that your total power requirement of 3000 KVA cannot be catered at 11 KV as per feasibility received from our field office. Please note that as per recent amendment condition No. 28 power requirement of2500 KVA and above requirement to be catered at 66 KV or above . voltage as per condition of supply. We are accordingly advising our E. E. (Const. ) Amreli to send feasibility report" 5. A certificate dated 4. 09. 1997 was issued by a Chartered Engineer wherein the following observation was made: "c.

Crucibles are converted to 4500 Kg. capacity due to lack of power supply. " 6. Our attention has also been drawn to a letter dated 7. 04. 2000 issued by the Customs and Central Excise, Commissionerate, Rajkot addressed to the Deputy Commissioner wherein it was stated: "Parameters which are crucial for the dete1mination capacity of production ofthe Induction furnace were measured in presence ofthe authorized person ofthe unit (Drawing ofthe measurement is enclosed herewith). As shown in the drawing the heating coils which wrapped around the Crucible Furnace are only upto "Metal Level". Hence, only upto that level scrap can be melted. Weighment ofIron ingots, duly manufactured in during the visit were made. In each batch, number ofingots manufactured on an average taken from three batches comes to 42 nos. per batch. And the weight :B offive nos. of ingots from different batches was taken and the ~· average weight of one ingot came to 98 kgs.

Hence, average production on the basis ofthis calculation comes to 4. I tones per batch. Moreover, one heat (batch) time required is about I hours and 30 minutes. " 7. Despite the same, Mr. Banerjee would submit that a show cause notice was issued purported to be only on the premise that the appellant had not intimated any proposed change in the induction furnace to the Commissionerate which is contrary to the fact as such an intimation had been given to the authorities, as would appear from the show cause filed . -·~ by the appellant therein on 6. 02. 2001 wherein it was stated: "... We have found out from our records that on the date ofcarrying out modifications i. e. on 14. 5. 1997 we had addressed a letter dated 14. 5. 1997 to the Superintendent ofCentral Excise, AR- Sihor, intimating that we were carrying out changes in the capacity ofour crucible through Mis Furcon Consultancy Services. We have given detailed reasons necessitating such modification.

A copy of the said letter dated 14. 5. 1997, duly received in the office ofthe said Superintendent, is enclosed for your perusal. After completion _y ofthe changes, we again informed the said Superintendent vide our letter dated 16. 5. 1997, a receipted copy of which is also enclosed for perusal. Even though at that time the compounded levy was not in force, still we kept the Department informed of the changes carried out by us. It is, therefore, not correct to allege that the department was not informed about the changes. " It was urged that the said statement having not been factually disputed, what arose for consideration was the legal interpretation ofthe rules. l ~- The said contention ofthe appellant, however, was rejected by the respondent on the ground that modification ofthe capacity of induction furnace was irrelevant; the only relevant criterion therefor being the installed capacity. Mr.

Banerjee would submit that such a finding on the part ofthe respondent was eminently unreasonable as the said conclusion could not have been arrived at in view ofthe extant rules. . , 8. Submission of Mr. Gopal Subramanium, learned Additional Solicitor General appearing on behalfofthe respondent, on the other hand, is that the Tribunal having arrived at a finding offact, no question oflaw . arose for consideration before the High Court. 9.

Section 3A(2) ofthe Central Excise Act reads as under: "(2) Where a notification is issued under sub-section (1 ), the Central Goveniment may, by rules, provide for determination of the annual capacity ofproduction, or such factor or factors relevant to the annual capacity ofproduction ofthe factory in which such goods are produced, by the Commissioner ofCentral Excise and such annual capacity ofproduction shall be deemed to be the annual production ofsuch goods by such factory: Provided that where a factory producing notified goods is in operation only during a part of the year, the production thereof shall be calculated on proportionate basis ofthe annual capacity ofproduction. " 10. The show cause notice dated 19. 06. 2000 was issued to the appellant by the respondent on the premise that the capacity of the 'i~ induction furnace is in excess of4. 5 MTs.

The question as to whether in effect and substance the appellant had reduced the capacity ofthe said induction furnace or not is essentially a question offact. The Tribunal has passed a very detailed order. It took into consideration all the contentions raised by the appellant herein. It is evident that on representation having been made by the appellant that the capacity ofthe furnace stood reduced, *.... Deputy Commissioner was deputed by the Department for the purpose of measurement and verification of the parameters of furnace on 8. 03. 2000. The officers ofthe Department had actually seen the melting capacity of the furnace and the average production. They took into consideration the actual production recorded in RG I registers. On verification ofthe relevant registers, it was found that the actual production recorded was nearer to the level of 8 M. Ts.

The rule no doubt provides for determining the annual capacity in case where manufacturer proposes to increase or decrease the capacity ofthe induction furnace but before · the said authorities even Shri Deepak Shah, Chartered Engineer was capacity would be based upon it. That this is so (illegible) from the provisions ofRule 4. This Rule provides for determining the annual capacity in case where a manufacturer proposes to increases or (illegible) the capacity ofthe induction furnace. ''No doubt the Rules does (illegible) "installed capacity". In the context ofthe other Rule it is clear that (illegible) too the capacity ofa furnace, not when it was initially constructed, but (illegible) the increase or decrease referred to in that Rules, newly determined (illegible) capacity".

He emphasized that since Rule 4 provides for change (illegible) capacity in a case where the capacity is already fixed at the commencement ofthe scheme, the change which has already taken place before (illegible) commencement ofthe scheme, is required to be given due weightage (illegible) consideration; that the last sentence of Rule 4 of ACD Rules makes (illegible) obl~atory on the part ofCommissioner to determine the date from which the change in the installed capacity has taken place. " 12. In its judgment, the Tribunal has noticed: "... These evidences, according to Revenue are (i) measurement ofCrucible volume ofthe furnace (specific gravity x volume) which works out to be 7. 97 MTs (ii) the weight ofMS Ingots including runners and riser produced in a single heat during spot visit was 5. 86 MTs (iii) Increase in power consumption and (iv) scrutiny of daily production. We find substantial force in the finding ofthe commissioner which are contained in the impugned order... " 13.

Upon consideration ofall relevant facts, as a finding offact had been arrived at by the Tribunal, in our opinion, the High Court cannot be said to have committed any error in passing the impugned judgment. ,... / ' ~-1- 14. Relevant portion ofSection 35G ofthe Central Excise Act reads as under: "35G. Appeal to High Court (1) An appeal shall lie to the High Court from every order passed in appeal by the Appellate Tribunal on or after the 1st day ofJuly, 2003 (not being an order relating, among other things, to the determination ofany question having a relation to the rate ofduty ofexcise or to the value ofgoods for the purposes ofassessment), if the High Court is satisfied that the case involves a substantial question oflaw... " 15. In terms of Section 35G ofthe Central Excise Act, the High Court, thus, could entertain an appeal only ifa question oflaw arose.

No question oflaw having, thus, arisen for consideration before the High Court, we are ofthe opinion that the impugned judgment does not suffer from any legal in:fumity. -~ 16. For the reasons aforementioned, there is no merit in this appeal which is dismissed accordingly. No costs. B. B. B. Appeal dismissed.