GUJARAT ELECTROMELT LTD. Vs. CCE

JUDGEMENT

(1.) Appellants are manufacturers of ingots and billets of non -alloy steel. They were liable to central excise duty at compounded rate. The rate depended upon the installed capacity of production. They had opted for such payment under Rule 96ZO(3) of the Central Excise Rules. Under the impugned order the Central Excise authorities have demanded duty on the basis of capacity of machinery installed in the appellant's factory.

(2.) The appellant has challenged the above demand on the ground that Diesel Generating (DG) set installed in the appellant's factory had broken down and was not functional leading to non -operation of one mill. Appellant claims that no duty should be demanded in respect of that mill during the period of non -production. It is the appellant's contention that production capacity means the effective production capacity and installed capacity means purposeful installation of machinery. During the hearing of the case, learned Advocate of the appellant emphasized that since the DG set was not generating electricity during the relevant period, the installed capacity of the machinery had to remain idle and any demand for this idle period of machinery would be unjust.

(3.) The appeals challenge Sub -rule (3) of Rule 96ZO as ultra vires the rule making power of the Central Government under Section 37 of the Central Excise Act, 1944. Para 1 of the appeal memorandum reads as under: