Compounded levy recovery fails where no final capacity order exists and the statutory levy is omitted without saving clause.

Differential duty based on annual production capacity was found unsustainable where capacity had been assessed only provisionally on the assumption that both furnaces were operating, while the record indicated that one furnace was idle and no final order determined the actual capacity. The text also states that recovery proceedings could not continue after omission of the levy provision and the relevant compounded levy rules without any saving clause. On that basis, the provisional demand was said to have no surviving legal foundation and the duty demand was set aside.

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Issues: (i) Whether the differential duty demand based on the annual capacity of production could be sustained when the assessee had asserted that only one furnace was functional and no final capacity determination had been made. (ii) Whether recovery proceedings could survive after omission of the levy provision and the relevant rules without any saving clause.

Issue (i): Whether the differential duty demand based on the annual capacity of production could be sustained when the assessee had asserted that only one furnace was functional and no final capacity determination had been made.

Analysis: The capacity and duty liability had been determined only on a provisional basis by taking both furnaces as operational, although the record noted that the smaller furnace was idle. The assessee's representation that only one furnace had been operated was not followed by any final order determining the actual capacity. In such circumstances, a demand for differential duty lacked a proper and could not be upheld on the basis of a provisional order alone.

Conclusion: The differential duty demand was not sustainable.

Issue (ii): Whether recovery proceedings could survive after omission of the levy provision and the relevant rules without any saving clause.

Analysis: The levy under Section 3A and the relevant compounded levy rules had been omitted without a saving clause. Once the statutory basis for the special levy and the rules governing its recovery ceased to exist, pending or fresh proceedings for recovery of differential duty could not be continued. The omission, coupled with the absence of a final capacity order, left no basis for enforcing the demand.

Conclusion: The recovery proceedings could not survive.

Final Conclusion: The duty demand was set aside and the appeal succeeded, as the provisional demand had no surviving legal foundation after omission of the governing levy provisions and rules.

Ratio Decidendi: Where the statutory levy and the governing rules are omitted without a saving clause, proceedings for recovery of differential duty cannot continue, and a provisional capacity determination unaccompanied by a final order cannot support enforcement of the demand.

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