Compounded levy and proof of service: dispatch alone was insufficient, and later switching to actual production basis was barred.

A certificate of posting or UPC evidences dispatch only, not delivery; where receipt is denied and authenticity is disputed, the sender bears the burden of proving service, and the alleged opt-out letter was not shown to have reached the department. Under the compounded levy framework, an assessee who elected duty payment under Rule 96ZO(3) could not later switch to assessment on actual production under section 3A(4) for the same period, so the duty demand was upheld. However, where the governing scheme itself prescribed the consequence for default, Rule 209 was not attracted on the facts found, and the separate penalty was deleted.

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Issues: (i) Whether the appellant proved that the letter dated 26.5.1998 seeking to opt out of the compounded levy scheme had been received by the department; (ii) whether an assessee who had opted for duty payment under sub-rule (3) of Rule 96ZO of the Central Excise Rules, 1944 could later switch to actual production basis under section 3A(4) of the Central Excise Act, 1944 for the same period; (iii) whether penalty under Rule 209 of the Central Excise Rules, 1944 was sustainable.

Issue (i): Whether the appellant proved that the letter dated 26.5.1998 seeking to opt out of the compounded levy scheme had been received by the department.

Analysis: A certificate of posting or UPC only indicates dispatch and does not by itself establish delivery to the addressee. Where receipt of the communication is denied and its authenticity is disputed, the burden lies on the sender to prove service. The appellant failed to produce evidence sufficient to establish that the alleged letter had actually reached the office of the Commissionerate.

Conclusion: The issue was decided against the appellant.

Issue (ii): Whether an assessee who had opted for duty payment under sub-rule (3) of Rule 96ZO of the Central Excise Rules, 1944 could later switch to actual production basis under section 3A(4) of the Central Excise Act, 1944 for the same period.

Analysis: The compounded levy framework and assessment on actual production are alternative schemes. Once the assessee exercises the option under the compounded levy scheme and duty liability is fixed on the basis of annual capacity of production, the assessee cannot adopt a hybrid course by later seeking assessment on actual production for the same period. The earlier acceptance of the capacity-based determination and payment thereunder supported the conclusion that the assessee remained bound by the scheme.

Conclusion: The assessee could not opt out of the compounded levy scheme for the disputed period, and the duty demand was upheld.

Issue (iii): Whether penalty under Rule 209 of the Central Excise Rules, 1944 was sustainable.

Analysis: Where duty liability is governed by sub-rule (3) of Rule 96ZO, the scheme itself provides the consequence for default. In such a situation, Rule 209 was not attracted on the facts found by the Tribunal, and the separate penalty imposed under that rule could not be sustained.

Conclusion: The penalty under Rule 209 was set aside in favour of the appellant.

Final Conclusion: The duty demand was sustained, but the separate penalty was deleted, resulting in only partial relief to the appellant.

Ratio Decidendi: A certificate of posting proves dispatch, not service; and an assessee who has elected a compounded levy scheme cannot later claim assessment on actual production for the same period, while a penalty provision not attracted by the governing scheme cannot be separately invoked.

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