Pro-rata refund under compounded levy rules was admissible where factory closure and cessation of production fell within Rule 16.

Under the compounded levy scheme for pan masala packing machines, Rule 10 permits abatement only for non-production lasting 15 days or more, while Rule 16 applies where a manufacturer permanently ceases to work in respect of all installed machines and gives the required intimation. On the facts, closure intimation, departmental sealing of machines, and cessation of all manufacturing activity brought the claim within Rule 16. Reopening of the factory after a later ban did not defeat the earlier closure-based refund claim. The refund denial based only on the six-day closure and non-fulfilment of Rule 10 was unsustainable, and the pro-rata refund was held admissible.

---

---

Issues: Whether refund of duty was admissible when the manufacturer closed its factory and ceased production for 6 days before reopening the unit, and whether such claim fell under Rule 10 or Rule 16 of the Pan Masala (Packing Machine Capacity Determination and Collection of Duty) Rules, 2008.

Analysis: The duty under the compounded levy scheme was paid in advance on the basis of operating packing machines. Rule 10 grants abatement only for non-production during a continuous period of 15 days or more, whereas Rule 16 applies notwithstanding the other rules where a manufacturer permanently ceases to work in respect of all machines installed in the factory and intimates surrender of registration. The closure intimation, sealing of machines by the department, and the factual cessation of all manufacturing activity brought the case within the wider language of Rule 16. The subsequent reopening of the factory after the ban was made effective from a later date did not nullify the earlier closure or defeat the refund claim, and the manufacturer could not be denied relief merely because the factory was reopened due to later events.

Conclusion: The claim for pro-rata refund was maintainable under Rule 16, and the denial of refund on the ground that the closure was only for 6 days and did not satisfy Rule 10 was unsustainable.

Final Conclusion: The impugned order rejecting refund was set aside and the assessee was held entitled to refund of the duty paid for the closure period.

Ratio Decidendi: Where a manufacturer permanently ceases production in respect of all installed machines and gives the requisite intimation, pro-rata refund of excess duty is admissible under Rule 16 of the compounded levy rules, and the claim is not confined to the 15-day abatement condition in Rule 10.

---