Incidental production under compounded levy is occasional, not regular, where notified goods remain the predominant output.

The term "incidentally produces" in the Explanation to Notification No. 24/97-C.E. (N.T.) was construed contextually with "ordinarily produces" to mean occasional, not normal, production. On the facts, the unit's alloy steel castings formed only a small part of output, while non-alloy steel ingots and billets were the predominant production. A unit with such predominantly notified-goods output falls within the intended coverage of the compounded levy framework, and the applicable duty structure was correctly applied on that basis.

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Issues: Whether an induction furnace unit predominantly manufacturing non-alloy steel ingots and billets, but also producing alloy steel castings to a limited extent, could be treated as a unit which 'ordinarily produces' notified goods and only 'incidentally produces' castings for the purposes of the Induction Furnace Annual Capacity Determination Rules, 1997 and the Compounded Levy Scheme.

Analysis: The expression 'incidentally produces' in the Explanation to Notification No. 24/97-C.E. (N.T.) dated 25-7-1997 was construed in its statutory setting alongside the words 'ordinarily produces'. On that construction, 'incidentally' denotes occasional production as opposed to normal or ordinary production. The material on record showed that the appellant's production of alloy steel castings was only a small fraction of the total output, while non-alloy steel ingots and billets formed the predominant output. In that factual setting, the unit fell within the class of units contemplated by the Explanation. The duty structure applicable to the compounded levy arrangement was therefore correctly applied by the appellant.

Conclusion: The appellant was entitled to be treated as a unit predominantly producing the notified goods, and the demand and penalty based on the contrary view were unsustainable.

Ratio Decidendi: Where a fiscal provision distinguishes between units that 'ordinarily produce' specified goods and those that only 'incidentally produce' other goods, the term 'incidentally' must be read contextually as occasional production, and a unit with predominantly notified-goods production falls within the intended coverage of the provision.

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