Proportionate duty and abatement under the compounded levy scheme were upheld for partial factory closure

Rule 9 of the Tobacco Packing Machines Rules, 2010 governs payment of duty on notified goods, while Rule 10 allows abatement where production remains suspended for a continuous period of 15 days or more, subject to the prescribed intimation. On the admitted facts of partial factory closure in April 2012 and recommencement of production on 16 April 2012, harmonious reading of the two rules supported proportionate duty payment and suo motu abatement. The contemporaneous knowledge of the Revenue through the panchnama also supported compliance with the scheme. The view that Rule 10 was violated, and the consequential interest demand, was held unsustainable.

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Issues: Whether, on the admitted facts of closure of the factory for part of April 2012 and commencement of production on 16 April 2012, the assessee was required to pay duty for the whole month under the compounded levy scheme and then seek abatement, or was entitled to pay proportionate duty under Rule 9 of the Tobacco Packing Machines Rules, 2010 and claim abatement under Rule 10.

Analysis: Rule 9 governs payment of duty for notified goods by the prescribed date, while Rule 10 permits abatement where no notified goods are produced during a continuous period of 15 days or more, subject to the stipulated intimation. On a harmonious reading of both provisions, the admitted closure of the factory and the contemporaneous knowledge of the Revenue through the panchnama supported compliance with the scheme. The payment of proportionate duty and the suo motu abatement were not contrary to the rules, and the finding of violation of Rule 10 and the consequential interest demand was unsustainable.

Conclusion: The assessee was entitled to the benefit of proportionate duty and abatement, and there was no violation of Rule 10; the interest confirmed by the appellate authority was set aside.

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