Proportionate refund under compounded levy scheme applies when machines remain inoperative and no actual production occurs.

Under the compounded levy scheme, proportionate refund or abatement is available where one or more machines remain inoperative for part of a month, because duty must correspond to actual operation and production. The analysis applies Notification No. 17/2007-CE and follows the principle that no duty can be levied on notional or estimated production when a machine does not run and no production takes place for the relevant period. The fact that the non-working period covered only part of a month does not change the entitlement to refund of duty recovered for the inoperative period, with applicable interest.

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Issues: Whether an assessee operating under the compounded levy scheme was entitled to pro rata refund or abatement of duty for the period during which one or more machines remained inoperative for part of the month.

Analysis: The claim was examined in the context of Notification No. 17/2007-CE dated 01.03.2007 and the earlier ruling that, where a machine does not operate and no production takes place for the relevant period, duty cannot be levied on notional or estimated production. The earlier precedent holding that refund is available when duty has been recovered for a period in which the machine remained non-operational was followed. The fact that the non-working period was only part of a month did not alter the principle that duty under the scheme must correspond to actual operation and production.

Conclusion: The assessee was entitled to refund of the proportionate duty for the period the machines remained inoperative, along with applicable interest.

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