Compounded levy refund allowed where an inoperative machine produced no goods and duty was paid without manufacture.

Under the compounded levy scheme, excise duty was held not leviable for the period in which a declared machine remained inoperative and no manufacture took place. The authority accepted the intimation that the machine was out of operation, and the excess duty paid in advance for that non-operative period could not be retained merely because duty had been paid under a special scheme. Applying the principle that excise duty arises only on manufacture, CESTAT New Delhi held that the refund claim was maintainable and the denial of refund was unsustainable.

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Issues: Whether duty paid in advance under the compounded levy scheme was refundable for the period during which one of the machines remained inoperative and no manufacture took place.

Analysis: The appellant had paid monthly compounded duty in advance for all declared machines. One machine became inoperative after payment, and the competent range authority accepted the intimation and permitted the machine to remain out of operation for the relevant period. The demand was for refund of the excess amount attributable to the non-operative period. Since excise duty is attracted by manufacture, and no goods were produced from the inoperative machine during that period, the excess duty paid could not be retained merely because the assessee was under a special compounded levy arrangement. The cited precedent was followed, and the principle that duty cannot be levied in the absence of manufacture was applied.

Conclusion: The refund claim was maintainable, and the denial of refund was unsustainable. The issue is decided in favour of the assessee.

Ratio Decidendi: Under the compounded levy scheme, where a declared machine remains inoperative and no manufacture occurs for the relevant period, excise duty is not leviable for that period and excess duty paid is refundable.

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