Compounded levy scheme election is year-specific; fresh capacity determination is required before confirming subsequent demand.

A manufacturer's election under the compounded levy scheme binds only for the relevant year, and it does not automatically carry forward to a subsequent period. Where the assessee had expressly opted out for the later year, the earlier annual capacity determination could not sustain a fresh demand. In the absence of a revised determination of annual capacity of production for 1998-99, confirmation of duty under Rule 96ZP(3) was not justified. The demand was therefore held unsustainable and the issue was decided in favour of the assessee.

---

---

Issues: Whether demand could be confirmed under Rule 96ZP(3) of the Central Excise Rules, 1944 for the subsequent period when the manufacturer had opted out of the compounded levy scheme and no fresh determination of annual capacity of production had been made.

Analysis: The option under the compounded levy scheme was treated as binding only for the relevant year. The manufacturer had given a clear letter opting out of the scheme for the later period, and the earlier determination of annual capacity of production did not continue automatically for the subsequent year. In the absence of a revised determination of annual capacity of production for 1998-99, confirmation of duty demand under the compounded levy scheme was not justified.

Conclusion: The demand was unsustainable and the issue was decided in favour of the assessee.

Ratio Decidendi: An election under the compounded levy scheme binds only for the concerned year, and for a subsequent year the department must act on a fresh determination before confirming demand.

---