Compounded levy scheme and deemed credit: fresh registration supported adjustment, while duty demand and penalty were unsustainable.

Fresh registration as an independent unit prevented the assessee from being treated as the same unit as before, so the compounded levy scheme issue had to be examined on that basis. The notifications governing the scheme contemplated adjustment through 50% deemed credit where the benefit was found inapplicable, and the record showed duty had already been discharged to a substantial extent. On those facts, the remaining duty demand could not be sustained, and the absence of mala fides meant penalty was not justified. The duty demand and penalty were therefore set aside.

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Issues: Whether the assessee was entitled to the benefit of the compounded levy scheme and consequential deemed credit, and whether the duty demand and penalty could be sustained.

Analysis: A fresh registration had been issued to the assessee as an independent unit, so the conclusion that it stood in the same position as the earlier unit could not be accepted. The order also recorded that duty had already been discharged to the extent of Rs. 36,37,677/- and that the notifications governing the scheme contemplated adjustment where the benefit was found inapplicable. In that situation, the authority was required to consider the 50% deemed credit available under the applicable notifications, and the remaining demand could not be sustained on the facts. The record also did not establish mala fides so as to justify penalty under the relevant provisions.

Conclusion: The assessee was held entitled to the benefit of adjustment by deemed credit, and the duty demand and penalty were set aside.

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