Compounded levy under central excise was inapplicable after manufacturing of notified goods ceased and the department was informed.

Section 3A of the Central Excise Act and the Induction Furnace Annual Capacity Determination Rules, 1997 were found inapplicable where the assessee had stopped manufacturing non-alloy steel ingots and billets, informed the department, and shifted to other cast articles. The departmental records showed that the closure and change in production were intimated to, verified by, and acted upon by excise . In that factual setting, the mere presence of moulds or a prior annual capacity determination did not establish manufacture of the notified goods, so the compounded levy scheme could not be applied. The demand and penalty were therefore unsustainable.

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Issues: Whether Section 3A of the Central Excise Act, 1944 and the Induction Furnace Annual Capacity Determination Rules, 1997 applied when the assessee had stopped manufacturing non-alloy steel ingots and billets, intimated the department, and shifted to manufacture of other cast articles, and whether the demand based on annual capacity could be sustained.

Analysis: The records showed that the assessee had intimated the jurisdictional excise officers about closure of the factory for a part of the relevant period and the subsequent stoppage of production of non-alloy steel ingots and billets, along with a switch to other cast products. Those intimations were verified by the Superintendent and Assistant Commissioner and were acted upon by the department. In that situation, the mere existence of moulds or a prior determination of annual capacity did not establish actual manufacture of the notified goods. As the assessee was not manufacturing non-alloy steel ingots and billets, the compounded levy provisions were not attracted.

Conclusion: Section 3A was held inapplicable, and the demand and penalty could not be sustained. The Revenue's appeal failed.

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