Compounded levy abatement and procedural payment sequence did not justify penalty where substantive entitlement was established.

Penalty under the compounded levy scheme was found unwarranted where the assessee had kept one stenter machine sealed during the relevant period and was substantively entitled to abatement. The duty demand was later made good, and abatement was ultimately allowed after adjustment of interest for delayed payment. The dispute over whether full duty had to be paid first and abatement claimed later was treated as procedural, not a substantive default. As the assessee was eligible for abatement broadly matching the amount in issue, the penal consequence could not be sustained.

---

---

Issues: Whether penalty was sustainable where the assessee, operating under the compounded levy scheme, had kept one stenter machine sealed during the relevant period, was eligible for abatement, and had ultimately paid the balance duty with abatement later granted.

Analysis: The relevant period showed that the stenter machine remained closed and the assessee was entitled to abatement. The duty demand was subsequently made good and abatement was also allowed after adjustment of interest for delayed payment. The dispute as to whether full duty ought to have been paid first and abatement claimed thereafter was treated as a matter of procedure. In these circumstances, and since the assessee was eligible for abatement nearly equal to the amount involved on the same issue, the penal consequence was found unwarranted.

Conclusion: Penalty was not justified and could not be sustained; the finding was in favour of the assessee.

Final Conclusion: The appeal succeeded to the extent that the penalty order was set aside.

Ratio Decidendi: Where the assessee is substantively entitled to abatement under the compounded levy scheme and the dispute concerns only the manner and sequence of payment and claim, penalty is not warranted in the absence of substantive default.

---