Proportionate computation of excise liability on partial-year closure led to remand for fresh adjudication.

A statutory plea that production during only part of the year required proportionate computation under the proviso to Section 3A(2) was treated as going to the root of liability. Because the assessee contended that the factory had remained closed for the relevant period, the Tribunal held that the adjudicating authority had to examine the genuineness of closure and the proportionality basis in the first instance. The existing demand order was therefore not sustained, and the matter was remanded for fresh decision after granting a reasonable opportunity of hearing.

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Issues: Whether the demand under Rule 96ZP(3) of the Central Excise Rules, 1944 was liable to be set aside and the matter remanded for fresh consideration on the assessee's plea that, in view of the proviso to Section 3A(2), production during only part of the year had to be computed on a proportionate basis.

Analysis: The appeal raised a plea that the factory had remained closed for the relevant period and that, once the genuineness of closure was accepted, the levy had to be worked out only on a proportionate basis under the proviso to Section 3A(2). The Tribunal noted that this plea went to the root of the dispute and required examination by the adjudicating authority in the first instance. In these circumstances, the existing order was not sustained and the matter was sent back for fresh decision after granting a reasonable opportunity of hearing.

Conclusion: The impugned order was set aside and the matter was remanded for de novo decision on the assessee's plea.

Final Conclusion: The assessee obtained a remand for reconsideration of the demand on the statutory proportionality plea, with the earlier adjudication annulled.

Ratio Decidendi: A statutory plea going to the root of liability, particularly one requiring computation on a proportionate basis under the governing proviso, must be examined by the adjudicating authority before the demand is finally affirmed.

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