Compounded levy scheme applies to opening stock clearances when monthly capacity-based excise duty has already been paid.

Excise duty attaches to manufacture, while the timing and manner of collection are matters of statutory administration. The document explains that the switch from ad valorem duty under Section 3 to the compounded levy scheme under Section 3A changed only the mode of collection, not the nature of the levy. Goods manufactured before the scheme but cleared after it came into force were therefore not liable to a second demand where the capacity-based duty for the relevant month had already been paid. The disputed clearances were treated as covered by the duty already discharged under the compounded levy scheme, and the additional demand was unsustainable.

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Issues: Whether goods manufactured before the introduction of the compounded levy scheme but lying in opening stock and cleared after the scheme came into force were liable to duty at the earlier ad valorem rate or stood covered by the duty paid under the compounded levy scheme.

Analysis: The liability under excise remains attached to manufacture, while collection may be regulated by the manner prescribed for administrative convenience. The shift from ad valorem duty under Section 3 of the Central Excise Act, 1944 to compounded levy under Section 3A of the Central Excise Act, 1944 changed only the mode of collection and not the nature of the levy. In these circumstances, the principle that duty may be collected at the time of removal applied, and no separate duty could be demanded again on the opening stock cleared after the scheme became operative where the capacity-based duty for the month had already been discharged.

Conclusion: The disputed clearances were covered by the duty already paid under the compounded levy scheme, and the additional demand was not sustainable.

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