Compounded levy abatement cannot be denied for delayed clearance of pre-existing stock when no manufacture occurred during the sealed period.

Under the compounded levy scheme, proportionate abatement is available where a factory does not manufacture notified goods during the continuous sealed period, because the charging basis under section 3A is non-production. Rule 10 permits sealing of machines and allows removal of pre-existing stock within the first two days of closure. On the facts, the machines remained sealed and no manufacture during closure was alleged; only delayed clearance of stock made before sealing occurred. That delay was treated as a procedural lapse and did not defeat the substantive entitlement to abatement. Denial of abatement on that ground was therefore unsustainable.

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Issues: Whether abatement of duty under the compounded levy scheme could be denied merely because cleared stock of goods manufactured before sealing of the machines was removed after the first two days of closure, when no notified goods were manufactured during the sealed period.

Analysis: Section 3A of the Central Excise Act, 1944 provides for proportionate abatement where a factory producing notified goods does not produce such goods during a continuous period of fifteen days or more. Rule 10 of the Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 requires sealing of the machines and prohibits manufacture during the closure period, while permitting removal of pre-existing stock within the first two days. The facts showed that the machines remained sealed for the relevant periods, there was no allegation of manufacture during closure, and the only default was delayed clearance of already manufactured stock. The Tribunal treated that lapse as a procedural infraction that did not defeat the substantive entitlement to abatement, especially since the charging provision itself ties duty to production and not to sealed machines remaining idle.

Conclusion: The abatement claim was allowable notwithstanding the delayed removal of pre-existing stock, and denial of abatement on that ground was unsustainable.

Ratio Decidendi: Where no notified goods are manufactured during the continuous sealed period, proportionate abatement under the compounded levy scheme cannot be denied merely for delayed clearance of already manufactured stock, since the substantive charging basis is non-production.

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