Compounded levy duty cannot rest on presumptions where no false declaration is proved and final duty determination remains unchallenged

Under the compounded levy regime for chewing and unmanufactured tobacco packing machines, differential duty could not be demanded on assumptions or presumptions where the Department failed to prove that the assessee's declaration was false or untrue. A duty determination for April 2010 had already attained finality and was not challenged, so it could not be displaced by treating a later installed machine as a double-track machine without concrete proof of misdeclaration. On that basis, the connected penalty also failed, and the demand was held unsustainable in favour of the assessee.

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Issues: Whether differential duty could be demanded under the Chewing & Unmanufactured Tobacco Packing Machine (Capacity Determination & Collection of Duty) Rules, 2010 read with Section 3A of the Central Excise Act on the basis of assumptions and presumptions, in the absence of a finding that the declaration filed by the assessee was false or untrue.

Analysis: Under the compounded levy scheme, additional duty could be demanded only where the declaration was shown to be false or where the statutory conditions for invoking the demand and penalty mechanism were satisfied. The Department did not establish any misdeclaration by the assessee, and the demand was founded only on inferences drawn from the later machine installed in May 2010. The order determining duty for April 2010 had attained finality and had not been challenged by the Department. The statutory scheme did not permit a fresh demand merely on presumptive treatment of the machine as a double-track machine without concrete proof of falsity in the earlier declaration.

Conclusion: The differential duty demand and the connected penalty were not sustainable, and the appeal was allowed in favour of the assessee.

Ratio Decidendi: Under the compounded levy regime, differential duty cannot be imposed unless the declaration is shown to be false or contrary to the statutory particulars, and a final unchallenged duty determination cannot be displaced merely on assumptions or presumptions.

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