Compounded levy duty cannot be demanded for a non-functional furnace, and interest or mandatory penalty needs express statutory authority.

Under the compounded levy scheme, duty was held not recoverable for the period a furnace remained demonstrably non-functional, and annual capacity had to be re-fixed from the date of permanent closure. Repeated intimations of breakdown, continued non-operation, and eventual closure were accepted as sufficient facts to support pro-rata liability and reassessment of capacity, notwithstanding the objection that the communications were not addressed to the Commissioner. Interest and mandatory penalty were also found unsustainable because the Supreme Court position treats such levies as lacking authority where the enabling provision does not expressly authorise them.

---

---

Issues: (i) whether the assessee was entitled to pro-rata duty liability for the period during which one furnace remained non-functional, and whether the annual capacity of production required re-fixation from the date of permanent closure of the furnace; (ii) whether interest and mandatory penalty could be sustained under the compounded levy regime.

Issue (i): Whether the assessee was entitled to pro-rata duty liability for the period during which one furnace remained non-functional, and whether the annual capacity of production required re-fixation from the date of permanent closure of the furnace.

Analysis: The records showed repeated intimations regarding breakdown, continued non-functioning, intended permanent closure, and eventual closure of the furnace. The denial of re-fixation on the ground that the intimations were not addressed to the Commissioner was found to be an insufficient basis to disregard the communications. The scheme being a compounded levy arrangement, duty could not be insisted upon for production that never came into existence. The period of non-functioning was also accepted on the facts.

Conclusion: The assessee was entitled to pro-rata duty liability for the period of non-functioning, and the annual capacity of production was required to be re-fixed from the date of permanent closure. This issue was decided in favour of the assessee.

Issue (ii): Whether interest and mandatory penalty could be sustained under the compounded levy regime.

Analysis: The applicable legal position, as laid down by the Supreme Court, was that the provisions imposing interest and mandatory penalty under the relevant compounded levy rules were without authority of law and ultra vires, since the enabling provision did not itself authorize such levies.

Conclusion: Interest and mandatory penalty could not be sustained against the assessee. This issue was decided in favour of the assessee.

Final Conclusion: The appeal succeeded on the principal reliefs relating to pro-rata duty, re-fixation of capacity, and deletion of interest and penalty, while the challenge to the quantum of abatement was not pursued.

Ratio Decidendi: Under the compounded levy scheme, duty cannot be demanded for a furnace that was demonstrably non-functional or permanently closed, and interest or mandatory penalty cannot be imposed unless the enabling statute expressly authorizes such levies.

---