Compounded levy and factory closure justify proportional duty working and partial interim relief in a stay dispute.

In a compounded levy dispute, the capacity fixation made by the Commissioner remained binding for stay purposes because the challenge to that determination was not shown to have been pursued in appeal. Prima facie closure of the factory from 31-10-1998, without evidence of reopening, made the proviso to Section 3A(2) relevant, so duty liability had to be worked out proportionately for the period of actual operation. The record did not show acceptable financial hardship, but partial interim protection was considered justified. The assessee was directed to make a pre-deposit towards duty, while pre-deposit and stay of recovery were waived for the penalty.

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Issues: Whether the assessee was required to pre-deposit the entire duty demand and whether waiver of pre-deposit and stay of recovery could be granted in respect of the penalty.

Analysis: The duty demand arose under the compounded levy scheme on the basis of the annual capacity of production determined by the Commissioner and intimated to the assessee. The challenge to that determination was not shown to have been pursued in appeal, so the capacity fixation remained binding for the purpose of the stay applications. The factory had been stated to be closed from 31-10-1998, and no reopening was found. On that basis, the proviso to Section 3A(2) was held to be prima facie applicable, so duty liability required proportional working for the operative period. The record also did not disclose acceptable evidence of financial hardship, but the circumstances justified partial protection at the interim stage.

Conclusion: The assessee was directed to pre-deposit Rs. 35,00,000 towards duty, while waiver of pre-deposit and stay of recovery were granted in respect of the penalty.

Ratio Decidendi: In a compounded levy case, where closure of the unit is prima facie established and the factory is not shown to have reopened, the duty liability may be worked out proportionately for the period of actual operation, and interim relief may be granted accordingly.

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