Compounded levy scheme demands fail without proof of manufacture and clearance, despite procedural non-compliance.

Under the compounded levy scheme, mere failure to complete the procedural declaration after obtaining permission could forfeit the concession and expose the manufacturer to duty at tariff rates, but excise duty still arose only on proof of actual manufacture and clearance. Here, the Revenue did not establish through connected records or other evidence that any stainless steel patta/pattis had been manufactured or removed. In the absence of such proof, the demand could not rest solely on procedural non-compliance, and the duty demands were set aside in favour of the assessee.

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Issues: Whether excise duty could be demanded under the compounded levy scheme when the manufacturers had obtained permission but the Revenue failed to establish that any manufacture or clearance of goods had taken place.

Analysis: The notification governing the compounded levy scheme required an application for permission and, thereafter, compliance with the prescribed declaration regarding the number of machines and duty payable. Failure to complete the second step meant loss of the concession and liability to duty on manufacture and clearance at the tariff rate. However, excise duty can arise only when goods are manufactured and cleared. In the remand proceedings, the Revenue did not establish by evidence from the connected records or other agencies that any stainless steel patta/pattis had actually been manufactured. In the absence of proof of manufacture and clearance, the mere non-compliance with the procedural requirement could not sustain the demand.

Conclusion: The duty demands were not sustainable and were set aside in favour of the assessee.

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