Compounded levy refund: pro-rata duty relief applies when machinery is non-functional and no manufacture occurs.

Under the compounded levy scheme, the notification was construed as fixing duty liability for the month in which the procedure was first granted, while the proviso's pro-rata formula was not limited to a first-time option where the machinery remained non-functional. Excise duty was read with the charging provision so that liability arises only when manufacture of excisable goods occurs. Accordingly, duty could not be retained for periods when the cold rolling machines were dismantled or not operative, and the departmental distinction was rejected; pro-rata refund relief was available for the non-operative period.

---

---

Issues: Whether an assessee operating under the compounded levy scheme was entitled to refund by way of pro-rata duty reduction for the period when the cold rolling machines were non-functional, and whether the benefit of pro-rata calculation was confined only to a first-time option under the notification.

Analysis: The notification was read as governing the duty liability for the month in which the application for the compounded levy procedure is first granted, and the pro-rata formula in the proviso was held not to regulate refund claims for periods when no manufacture took place because machines were dismantled or not operative. The duty of excise was also read in the light of the charging provision, under which levy arises only when manufacture of excisable goods occurs. On that basis, duty could not be retained for periods in which no manufacturing activity was carried on, and the distinction drawn by the departmental authorities was found unsustainable.

Conclusion: The refund claim was held allowable, and the assessee was entitled to pro-rata relief for the non-operative period of the machines.

---