Pre-deposit under compounded levy can be reduced by balancing financial hardship with prima facie merits of the challenge.

In appeals against duty demands under the compounded levy scheme, pre-deposit under Section 35F of the Central Excise Act, 1944 may be calibrated by balancing financial hardship against the prima facie merits of the challenge. The Tribunal considered that the duty demand was based on annual capacity of production, that the appellant disputed the capacity determination and furnace parameters, and that the unit had closed with severe financial constraints. Taking account of the admitted liability and the appellant's financial condition, the Tribunal limited the pre-deposit to a reasonable amount rather than insisting on full deposit.

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Issues: Whether, in an appeal against a duty demand under the compounded levy scheme, the appellant should be required to make a full pre-deposit or a reduced pre-deposit having regard to financial hardship and the prima facie merits of the case.

Analysis: The appeal arose from a demand founded on the annual capacity of production fixed under the compounded levy framework. The appellant asserted that the capacity determination was open to challenge, that changes in furnace parameters had not been considered, and that the unit had closed down with severe financial constraints. The Tribunal also took note of the admitted portion of liability and the overall financial condition while considering the extent of pre-deposit required under Section 35F of the Central Excise Act, 1944.

Conclusion: The appellant was directed to pre-deposit only Rs. 5 lakhs, and no larger pre-deposit was ordered.

Ratio Decidendi: In considering pre-deposit, the Tribunal may balance financial hardship with the prima facie merits of the appeal and restrict the deposit to a reasonable amount.

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