Abatement under compound levy scheme cannot be denied on a ground outside the show-cause notice when closure conditions are met.

Denial of abatement under the compound levy scheme cannot rest on a ground not set out in the show-cause notice, because a new basis raised at adjudication is not sustainable. The text also states that proportionate abatement under section 3A(3) of the Central Excise Act, 1944 is available where notified goods are not produced for a continuous period of at least seven days and the prescribed conditions are met. For the period in question, the amended Rule 96ZO(3) and Notification No. 44/97-CE (N.T.) were said not to bar relief, and the closure intimation was treated as timely compliance, so abatement was allowed.

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Issues: (i) whether denial of abatement could be sustained on a ground not stated in the show-cause notice, and (ii) whether the appellant was entitled to abatement of duty for the period of closure under the compound levy scheme.

Issue (i): whether denial of abatement could be sustained on a ground not stated in the show-cause notice

Analysis: The impugned order denied abatement on the footing that the restriction under Rule 96ZO(3) applied, although that was not the basis set out in the notice. A demand or denial founded on a new ground not put to the noticee cannot be sustained.

Conclusion: The denial of abatement on a ground beyond the show-cause notice was invalid and could not be sustained.

Issue (ii): whether the appellant was entitled to abatement of duty for the period of closure under the compound levy scheme

Analysis: Section 3A(3) of the Central Excise Act, 1944 permits proportionate abatement where notified goods are not produced for a continuous period of not less than seven days, subject to prescribed conditions. The amended Rule 96ZO(3) and Notification No. 44/97-CE (N.T.) dated 30.08.1997 showed that the restriction relied upon by the department was not applicable to the disputed period. The intimation of closure was also treated as timely compliance in the facts of the case.

Conclusion: The appellant was entitled to abatement for the relevant closure period.

Final Conclusion: The appeal succeeded, the impugned order was set aside, and consequential relief followed.

Ratio Decidendi: A duty denial cannot rest on a ground not alleged in the show-cause notice, and abatement under the compound levy scheme must be allowed where the statutory conditions for closure are satisfied and the applicable restriction has been removed.

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