Actual production basis for compounded levy duty applied to pending applications; penalty fell once demand was recomputed.

Compounded levy duty and annual production capacity were required to be reworked on an actual production basis where the assessee's application remained pending and had not been finally disposed of before the Supreme Court's direction covering pending matters. The relief applied from the date accepted by the assessee, and the concessional rate linked to the earlier option was therefore unavailable. Once the demand was to be recomputed on the revised basis, the penalty could not be sustained and was held not maintainable.

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Issues: Whether the assessee was entitled to have compounded levy duty and annual production capacity reworked on the basis of actual production for the period covered by its pending applications, and whether penalty could be sustained.

Analysis: The assessee's applications seeking assessment on actual production had remained pending, and the matter was covered by the Supreme Court's direction that duty be assessed for the whole year on the basis of actual production in respect of matters not yet closed and still pending before the authorities. The applications were not shown to have been finally disposed of before that direction, and the High Court had also directed a decision on the pending application in accordance with law. On that footing, the assessee was entitled to revision of annual production capacity on actual production basis from the date accepted by the assessee. Since the relief was granted on that basis, the concessional rate linked to the earlier option was not available. Penalty could not survive once the demand was to be reworked on the revised basis.

Conclusion: The assessee succeeded on the main issue and the annual production capacity was required to be fixed on actual production basis from 01.06.1998. The penalty was not sustainable.

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