Abatement for factory closure under compounded levy cannot be denied merely for lack of prior duty payment.

Processed textile fabrics under the compounded levy regime were eligible for abatement or rebate for closure periods exceeding seven days. The Revenue's objection that prior payment of duty was required under clause (e) of Rule 96ZQ(7) did not prevail because the rule had already been held ultra vires the enabling provision, and that challenge had been dismissed by the SC. In that setting, advance payment of duty could not be insisted upon, particularly where the exercise was revenue neutral. The assessee's claim for relief was therefore sustained and the Revenue's objection failed.

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Issues: Whether the assessee was entitled to abatement or rebate of duty for periods of closure under Rule 96ZQ, and whether the requirement of prior payment of duty under clause (e) defeated such claim.

Analysis: The processed textile fabrics were subjected to levy under Section 3A of the Central Excise Act, 1944, and the abatement claim arose from closure periods exceeding seven days. Although the Revenue relied on the amendment inserting clause (e) in Rule 96ZQ(7) to contend that duty had to be paid first for any claim of abatement of less than one month, the validity and effect of the rule could not assist the Revenue. The relevant rule had already been held ultra vires the enabling provision by the Madras High Court, and the challenge to that view was dismissed by the Supreme Court. In that background, the assessee was not required to pay duty in advance, particularly as the exercise was revenue neutral.

Conclusion: The assessee was entitled to the claimed abatement or rebate, and the Revenue's objection based on prior payment of duty failed.

Final Conclusion: The impugned order was left undisturbed and the Revenue's appeal failed, resulting in affirmation of the assessee's entitlement to relief.

Ratio Decidendi: Where the rule governing abatement has been held ultra vires, and the dispute is revenue neutral, the assessee cannot be denied abatement merely for want of prior payment of duty.

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