Proportionate duty under compounded levy scheme allowed when operations were closed for fifteen days or more; full monthly payment not required first.

Under the compounded levy scheme for pan masala packing machines, Rule 10 permits proportionate abatement where production is suspended for a continuous period of fifteen days or more after due intimation and sealing of machines. Reading Rules 9 and 10 together, the assessee was not required to first pay the full monthly duty and then seek refund or adjustment; where the unit remained closed, duty could be computed only for the actual operating period. Any delay in discharge attracted interest, but not a requirement to pay the full month's duty upfront. The demand based on that incorrect assumption was unsustainable, and the confirmed duty demand and penalties could not be sustained.

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Issues: Whether an assessee governed by the compounded levy scheme under the Pan Masala Packing Machine (Capacity Determination and Collection of Duty) Rules, 2008, who had closed operations for continuous periods of more than fifteen days after due intimation and sealing of machines, was required to first pay full monthly duty and thereafter claim abatement, or could directly compute and discharge duty on a proportionate basis for the operating period.

Analysis: Rule 10 grants abatement on a proportionate basis where there is non-production for a continuous period of fifteen days or more, but it does not prescribe any procedure requiring prior payment of full duty followed by a claim for refund or abatement. Reading Rules 9 and 10 together, the monthly duty is ordinarily payable by the 5th day of the month, but where the unit is closed and the actual duty liability can be ascertained only after the closed period, the assessee is not compelled to pay duty for the entire month and later seek adjustment. The only consequence for delay in payment is liability to interest for the period of delayed discharge. The impugned demand proceeding proceeded on an incorrect assumption that full duty had to be paid first, which was not supported by the rules.

Conclusion: The assessee was entitled to compute duty on a proportionate basis for the period of actual operation, and the demand for full monthly duty was unsustainable. Penalties and the confirmed duty demand were therefore not liable to be sustained.

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