Factory closure under compounded levy scheme permits proportionate excise relief and no duty for non-operational periods.

A manufacturer under the compounded levy scheme under Rule 96ZP(3) of the Central Excise Rules, 1944 could still claim proportionate relief under the proviso to Section 3A(2) of the Central Excise Act, 1944 for the period the factory remained closed. The Tribunal found that the Commissioner's reliance on Supreme Court authorities was misplaced because those decisions did not address the scope of the proviso in this factual setting. It followed earlier Tribunal rulings recognising abatement for closure periods of a mill or factory. The operative result was that duty was not payable for the period of factory closure.

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Issues: Whether a manufacturer who had opted for the compounded levy scheme under Rule 96ZP(3) of the Central Excise Rules, 1944 could claim the benefit of the proviso to Section 3A(2) of the Central Excise Act, 1944 for the period during which the factory remained closed.

Analysis: The Tribunal found that the Commissioner had relied on decisions that were not relevant to the present factual setting. The central question was whether the statutory proviso permitting calculation of production on a proportionate basis where a factory is in operation only during part of the year applied despite the assessee's option under the compounded levy scheme. The Tribunal noted that the cited Supreme Court decisions dealt with a different question and did not decide the scope of the proviso to Section 3A(2). It also relied on earlier Tribunal decisions holding that abatement is available for the period of closure of the mill or factory.

Conclusion: The benefit of the proviso to Section 3A(2) was held to be available, and the assessee was held not liable to pay duty during the period of closure of the factory.

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