Compounded levy duty remains binding until lawful redetermination of annual capacity; appellate relief cannot rewrite liability.

Under the compounded levy scheme, duty remained payable on the basis of the annual capacity of production determined by the competent authority until that capacity was lawfully redetermined under Section 3A(4) of the Central Excise Act, 1944. An assessee who sought to rely on lower actual production had to apply to the Commissioner for redetermination; mere opt-out from the scheme after the financial year did not alter the existing duty liability. In the absence of any valid redetermination order, appellate authorities could not rework the liability on their own, and the duty demand and consequential penalty were sustainable.

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Issues: Whether the assessee could escape duty liability under the compounded levy scheme from 1 April 1998 without obtaining redetermination of annual capacity and duty under Section 3A(4) of the Central Excise Act, 1944.

Analysis: The duty under Rule 96ZO was payable on the basis of the annual capacity of production determined by the competent authority. Although an assessee could opt out of the compounded levy scheme after the expiry of the financial year, such opt-out did not alter the existing determination of capacity or duty liability. If the assessee claimed that actual production was lower than the determined capacity, the statutory course was to approach the Commissioner under Section 3A(4) and seek redetermination. No such claim or order was obtained in this case, and the Commissioner (Appeals) had no jurisdiction to rework the liability on its own.

Conclusion: The assessee was not entitled to relief from duty liability from 1 April 1998 without a valid redetermination under Section 3A(4); the demand and consequential penalty were sustainable.

Ratio Decidendi: Under the compounded levy scheme, duty remains binding on the basis of the determined annual capacity until it is lawfully redetermined by the competent authority under Section 3A(4), and appellate authorities cannot grant reduction of liability in the absence of such redetermination.

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