Proportionate duty under compounded levy and settlement relief followed full disclosure and cooperation in a factory closure dispute.

Duty under the compounded levy scheme was confined to the period of actual factory operation where closure for part of the year was admitted, and the absence of surrender of the registration certificate was not decisive. The proviso to Section 3A(2) required proportionate assessment in such circumstances, so no duty was payable for the closed period. On settlement, the applicant's full and true disclosure, payment of the admitted amount, and cooperation satisfied the statutory conditions, and immunity from interest and penalty was granted. The matter was settled on the terms recorded by the Commission.

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Issues: (i) Whether the applicant, having opted to pay duty under Rule 96ZP(3), remained liable to pay duty for the period during which the factory had closed, or whether duty was restricted to the period of actual operation under the proviso to Section 3A(2); (ii) Whether the applicant was entitled to settlement, including immunity from interest and penalty, on the basis of full and true disclosure and cooperation.

Issue (i): Whether the applicant, having opted to pay duty under Rule 96ZP(3), remained liable to pay duty for the period during which the factory had closed, or whether duty was restricted to the period of actual operation under the proviso to Section 3A(2).

Analysis: The duty scheme under Section 3A and Rule 96ZP was examined in the light of the admitted closure of the factory. The absence of surrender of the registration certificate was held not to be decisive where the factual closure of the factory was not disputed. The proviso to Section 3A(2) specifically permits calculation of production on a proportionate basis where the factory is in operation only for part of the year. On that basis, the duty liability was confined to the period during which the factory was actually operating.

Conclusion: The duty liability was restricted to the actual period of operation, and the applicant was not liable for duty during the closed period.

Issue (ii): Whether the applicant was entitled to settlement, including immunity from interest and penalty, on the basis of full and true disclosure and cooperation.

Analysis: The applicant disclosed the duty liability, paid the admitted amount, and cooperated with the proceedings. On that footing, the conditions for settlement under Section 32K(1) were satisfied. The Commission also considered the circumstances of financial difficulty and closure while dealing with interest and penalty.

Conclusion: Immunity from interest and penalty was granted, and the matter was settled on the terms recorded by the Commission.

Final Conclusion: The settlement application was allowed on merits, the duty was confined to the period of actual manufacture, and complete settlement relief was granted on the basis of disclosure and cooperation.

Ratio Decidendi: Where a factory producing notified goods remains closed for part of the year, duty under the compounded levy scheme is to be worked out proportionately under the proviso to Section 3A(2), and settlement relief may follow upon full and true disclosure and cooperation.

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