Abatement under compounded levy requires prior Commissioner approval; unilateral duty reduction is not permitted, while penalty may still be waived.

Under the compounded levy scheme governed by Section 3A of the Central Excise Act and Rule 96ZO of the Central Excise Rules, abatement for continuous closure of a factory for at least seven days was not self-operative. It had to be granted only by an order of the Commissioner on the assessee's application, and the assessee could not unilaterally reduce duty liability before such approval. The duty demand was therefore upheld. On penalty, the Tribunal found that the facts did not justify penal consequences, so the penalty was set aside and relief was granted on that issue.

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Issues: (i) Whether abatement of duty under Rule 96ZO(2) of the Central Excise Rules, 1944 could be taken by the assessee on its own without an order of the Commissioner. (ii) Whether penalty was exigible in the facts of the case.

Issue (i): Whether abatement of duty under Rule 96ZO(2) of the Central Excise Rules, 1944 could be taken by the assessee on its own without an order of the Commissioner.

Analysis: Duty under the compounded levy scheme governed by Section 3A of the Central Excise Act, 1944 and Rule 96ZO of the Central Excise Rules, 1944 was payable in the manner prescribed by the rule. Abatement for continuous closure of the factory for not less than seven days was not self-operative and had to be granted by an order of the Commissioner on an application made by the assessee. In the absence of such an order, the assessee could not unilaterally reduce the duty liability by claiming abatement and paying duty on that basis.

Conclusion: The demand of duty was upheld and the assessee was not entitled to self-assess abatement without a prior order.

Issue (ii): Whether penalty was exigible in the facts of the case.

Analysis: The duty demand was sustained because the assessee had not obtained an order allowing abatement before adjusting the liability. However, on the facts and circumstances, the Tribunal found that the conduct did not justify penal consequences.

Conclusion: The penalty was set aside and relief was granted in favour of the assessee on this issue.

Final Conclusion: The duty demand remained intact, but the penal portion of the impugned order was annulled, resulting in a partly favourable outcome for the assessee.

Ratio Decidendi: Abatement of duty under the compounded levy scheme is allowable only on an order of the competent authority, and penalty may be waived where the circumstances do not warrant penal action.

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