Compounded levy capacity re-fixation required before duty is assessed after chamber removal from a hot-air stenter.

Under the compounded levy scheme, removal of a chamber from a hot-air stenter required re-fixation of annual capacity with an operative date before duty liability for the intervening period could be determined. Rule 96ZQ(7), which governs abatement only on complete factory closure for at least seven continuous days, could not be applied to a limited removal of a chamber. Where the lower appellate authority treated the dispute as one of abatement and did not examine the effect of failing to re-fix capacity, the demand could not stand on that basis and the matter had to be reconsidered on the correct legal footing.

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Issues: Whether the demand could be sustained by treating the matter as one of abatement under Rule 96ZQ(7), and whether, on removal of a chamber from a hot-air stenter under the compounded levy scheme, the annual capacity had to be re-fixed with an effective date before duty liability for the intervening period could be determined.

Analysis: Rule 96ZQ(7) applies only where there is complete closure of the factory for a continuous period of not less than seven days and an abatement is sought in the manner prescribed. The closure of a hot-air stenter for the limited purpose of removing one chamber is not the same as a claim for abatement on complete factory closure. Once permission had been granted for removal of a chamber, the competent authority was required to re-fix the annual capacity under the capacity determination rules and specify the date from which the revised capacity would operate. Since the lower appellate authority proceeded on the wrong footing that the dispute was one of abatement and did not examine the consequence of non-re-fixation of capacity, the demand could not be sustained as confirmed.

Conclusion: The issue was answered in favour of the appellant, and the matter required fresh determination after re-fixation of capacity and specification of the operative date.

Final Conclusion: The adverse appellate order was set aside and the dispute was sent back for fresh adjudication on the correct legal basis, namely re-determination of capacity rather than abatement.

Ratio Decidendi: Where removal of a chamber from a hot-air stenter changes the operative capacity under the compounded levy scheme, duty liability must be determined only after the competent authority re-fixes the annual capacity and specifies its effective date; a provision governing abatement for complete factory closure cannot be applied to such a situation.

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