Compounded levy duty demand and penalty fail where abatement eligibility was not disproved and the governing rule was ultra vires.

Differential central excise duty and penalty under the compounded levy scheme were held unsustainable where the assessee had obtained permission to erect an additional chamber and had intimated commencement and completion of the work. The department did not disprove the factual position or establish actual use of the disputed chambers. Although the demand was based on advance payment for the full month and separate claim of abatement, the governing rule had been struck down as ultra vires, and any lapse was treated as procedural. On merits, the assessee was also not shown to be ineligible for abatement, so the demand and penalty failed.

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Issues: Whether the demand of differential central excise duty and penalty was sustainable under the compounded levy scheme in relation to erection of an additional chamber and the claim for abatement during the relevant period.

Analysis: The appellants had obtained permission for erection of an additional chamber, had intimated commencement and completion of the work, and the record did not show that the department disproved the factual position or established actual use of the chambers in dispute. The demand was founded on the requirement that duty be paid in advance for the full month under the relevant rules and that abatement be claimed separately, but the Tribunal noted that the governing rule had been struck down as ultra vires and that the default, if any, was essentially procedural. On merits also, it was not shown that the appellants were ineligible for abatement.

Conclusion: The demand and penalty were not sustainable and the appeal succeeded.

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