Compounded levy remains basic excise duty, so special excise duty under the Finance Act applies additionally.

A compounded levy fixed by notification under Rule 96-ZI of the Central Excise Rules remained duty of excise chargeable under the parent statute at a modified rate. On that basis, the Finance Act, 1978 imposed a special excise duty equal to five per cent of the amount so chargeable, and Section 37(3) made it additional to the basic duty. The special duty was therefore recoverable over and above the compounded levy, and the demand was upheld.

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Issues: Whether goods assessed under the compounded levy scheme under Rule 96-ZI of the Central Excise Rules and the relevant notification were liable to special excise duty under Section 37(1) of the Finance Act, 1978 in addition to the amount payable under the compounded levy.

Analysis: The liability under Rule 96-ZI and Notification No. 85/71 was held to be a duty of excise payable under Section 3 of the Central Excises and Salt Act, 1944, though at a modified rate fixed by notification. The terms used in the rule and notification, read with the statutory definition of duty and the scheme of the Act, showed that the amount paid under the compounded levy remained the basic excise duty chargeable on the goods. Section 37(1) of the Finance Act, 1978 levied a special duty equal to five per cent of the amount so chargeable on such goods, and Section 37(3) made that duty additional to the basic duty. The reliance on the Delhi High Court ruling on the phrase "duty of excise" was found inapplicable because the Finance Act itself distinguished the special duty from the basic duty.

Conclusion: Special excise duty was leviable in addition to the amount payable under Rule 96-ZI and the notification, and the demand raised by the Assistant Collector was correct.

Ratio Decidendi: A compounded levy fixed by notification under the Central Excise Rules remains a duty of excise chargeable under the parent Act, and where the Finance Act creates a special duty payable on the amount so chargeable and expressly makes it additional, that special duty is recoverable over and above the compounded levy.

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