Special excise levy based on installed machinery does not apply for non-operational days; excess duty is refundable.

Under the special excise procedure for stainless steel patta/patti manufacturers, duty was fixed by reference to installed cold rolling machines. Where the machines were dismantled or not operational for part of the relevant months, duty was not payable for the non-working period, and excess duty paid for those days was refundable. The reasoning that the unit was not a first-time entrant under the scheme was found unsustainable. The note also applies the principle that excise duty is levied on manufacture and that refund under Section 11B is available for excess duty paid when machinery was not in existence or not functioning.

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Issues: Whether the appellant was entitled to refund of proportionate central excise duty paid for the period during which the cold rolling machines were not operational under the special procedure notified for stainless steel patta/patti manufacturers.

Analysis: The special procedure under Notification No. 17/2007-C.E. dated 01.03.2007, issued under Rule 15 of the Central Excise Rules, 2002, fixes duty by reference to installed cold rolling machines. Once machines were dismantled or not functioning for part of the relevant months, duty could not be demanded for the non-operational period. The reasoning adopted by the lower authorities that the appellant was not a first-time entrant under the scheme was held to be unsustainable. The refund claim was also supported by the principle that excise duty is leviable on manufacture, and excess duty paid for a period when machines were not in existence or not working is refundable under Section 11B of the Central Excise Act, 1944.

Conclusion: The appellant was entitled to proportionate refund of duty for the days when the machines were not operational.

Ratio Decidendi: Under a compounded levy or special procedure scheme based on installed machinery, duty is not payable for periods when the machinery is dismantled or non-operational, and excess duty paid for such periods is refundable.

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