Compound levy duty under the Pan Masala machine scheme is confined to the actual working period of a sealed machine.

Under the Pan Masala Packing Machine scheme, duty liability did not arise for the period during which the second machine remained sealed and non-operational. The article states that the factory could not be treated as wholly closed merely because one machine continued working, and therefore the prorata refund mechanism under Rule 10 was inapplicable where the duty itself was not chargeable for the sealed period. The proper computation was confined to the actual working period of the machine, with interest to be recalculated accordingly, and any excess duty paid was to be adjusted by consequential relief.

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Issues: Whether duty under the compound levy scheme was payable for the period during which the second machine remained sealed, and whether the demand had to be first discharged in full followed by a refund claim.

Analysis: The dispute arose under the Pan Masala Packing Machine scheme notified under Section 3A of the Central Excise Act, 1944 and the Pan Masala Packing Machine (Capacity Determination and Collection of Duty) Rules, 2008. The sealed machine was not operational during the relevant period, and the factory could not be treated as wholly closed merely because one machine continued to work. On that basis, the scheme of prorata refund under Rule 10 was held inapplicable, because the liability itself did not arise for the period when the machine remained sealed. The proper course was to determine the actual working period of the machine and compute duty only for that period, with interest.

Conclusion: Duty was not payable for the period during which the machine remained sealed. The impugned order was modified and the matter was remanded to recompute duty and interest on the basis of the working period, with consequential relief if excess duty had been paid.

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