Compounded levy under furnace-based capacity assessment: duty must follow proven operation, while interest and penalty lapse after omission.

Under the compounded levy scheme, annual production capacity could not be fixed on the basis of two furnaces where the assessee had intimated operation of only one furnace and the record contained no evidence that both furnaces were working for the relevant month. Duty was therefore required to be recalculated on the basis of one furnace, as fixation on assumptions and presumptions was unsustainable. On the effect of omission of the relevant compounded levy provisions, interest and penalty were not enforceable, although the duty component remained protected. The payable amount was to be recomputed accordingly.

---

---

Issues: (i) Whether duty for the relevant month was payable on the basis of one furnace or two furnaces for fixing annual production capacity under the compounded levy scheme; (ii) Whether interest and penalty were sustainable after omission of the relevant rules.

Issue (i): Whether duty for the relevant month was payable on the basis of one furnace or two furnaces for fixing annual production capacity under the compounded levy scheme.

Analysis: The appellant had intimated that only one furnace was being operated, and there was no evidence that both furnaces were in operation for the month in question. In the absence of proof of operation of both furnaces, fixing duty on the basis of two furnaces was held to rest on assumption and presumption and could not be sustained.

Conclusion: Duty was payable only on the basis of one furnace, and the demand was to be recalculated accordingly.

Issue (ii): Whether interest and penalty were sustainable after omission of the relevant rules.

Analysis: In view of the Supreme Court's clarification on the effect of repeal or omission of the relevant compounded levy provisions, the levy of interest and penalty was not enforceable, although the duty element remained protected.

Conclusion: Interest and penalty were not payable.

Final Conclusion: The appeal was allowed in part by restricting duty liability to one furnace and by setting aside interest and penalty, with consequential recalculation of the payable amount.

Ratio Decidendi: Where the Revenue fails to establish operation of multiple furnaces under a compounded levy scheme, duty cannot be fixed on conjecture, and interest or penalty cannot survive after omission of the enabling provisions.

---