Compounded levy on khandsari sugar cannot extend to centrifugals removed from the factory or no longer functioning.

Under the compounded levy scheme for khandsari sugar, excise duty was linked to the number and size of centrifugals installed for manufacture, not to a notional seasonal liability. Because the scheme treated production capacity as the basis of levy, a centrifugal that had been removed from the factory or was no longer in existence after notice to the excise authorities could not be treated as a taxable unit for the period after removal. The court also rejected the maintainability objection, noting that no effective departmental order had been passed or communicated, so the suggested statutory remedy was not realistic in the circumstances.

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Issues: Whether, under the compounded levy scheme for khandsari sugar, excise duty was payable on centrifugals that had been removed from the factory or were not actually working after notice to the excise authorities.

Analysis: The scheme under Rules 92A to 92C of the Central Excise Rules, 1944 fixed duty with reference to the number and size of centrifugals installed for manufacture and not with reference to mere seasonal liability in the abstract. The rate was determined on the basis of average production from installed centrifugals, payment was stated to discharge the duty on production, and the unit was deemed to commence or close only when the centrifugal started or stopped producing sugar. On that structure, a removed centrifugal or one not in existence could not be treated as a taxable unit for the period after removal. The objection on maintainability was also rejected because no effective order had been passed or communicated by the departmental authority, making the suggested statutory remedy unreal in the circumstances.

Conclusion: Duty was not payable on centrifugals that had been removed or were not in existence, and the writ petitions were maintainable.

Final Conclusion: The petitioners were entitled to relief against collection of excise duty on the removed centrifugals, and the departmental demand was set aside to that extent.

Ratio Decidendi: Under a compounded levy scheme framed with reference to installed machinery and actual working capacity, excise duty cannot be levied on machinery that has been removed from existence or is not functioning after due notice.

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