Section 3A abatement for factory closure cannot be denied on an unproved Rule 96ZP(3) election; duty must follow actual production.

Under Section 3A, duty had to be aligned with actual production and proved factory closure, and abatement could not be denied on a mere assumption that the assessee had opted into the monthly scheme under Rule 96ZP(3). The record did not establish a valid election under that rule, and the authorities had not shown that the closure-based abatement claim was examined on merits in accordance with law. The demand was therefore not sustainable in full; duty was confined to the payable period, the balance demand was upheld only to the extent stated, and the penalty was set aside.

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Issues: Whether the assessee, in the context of Section 3A, was entitled to abatement of duty for periods of factory closure and whether the duty demand could be sustained on the basis of Rule 96ZP(3) notwithstanding the claim that no option under that rule had been exercised.

Analysis: The provisions of Section 3A contemplate levy on the basis of annual capacity, but also recognise redetermination where actual production is lower and abatement where production stops for the requisite period. The record did not show that the assessee had opted into the monthly payment scheme under Rule 96ZP(3), and the revenue did not adduce convincing material to establish such an option. Even otherwise, the statutory scheme does not treat the consequence of Rule 96ZP(3) as permanent so as to deny relief for actual closure or reduced production. The claim for closure-based abatement was therefore required to be examined on merits, and the authorities had not shown that such examination had been undertaken in accordance with law.

Conclusion: The assessee was entitled to have duty determined on the basis of actual production and closure periods, and the demand could not be sustained in full. The duty was confined to the period found payable, the balance demand was upheld only to the extent of Rs. 1,23,990/-, and the penalty was set aside.

Final Conclusion: The decision grants relief on the abatement and penalty issues while sustaining only the reduced duty liability.

Ratio Decidendi: Where Section 3A applies, an assessee cannot be denied abatement for proved closure or reduced production merely on an unsubstantiated assumption that the monthly scheme under Rule 96ZP(3) was opted into, and duty must be aligned with the statutory mechanism for actual production and abatement.

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