Capacity-based excise duty default is confined to the period of non-payment, not the entire remaining financial year.

Under the capacity-based duty scheme for pan masala packing machines, the consequence of default in monthly duty payment was limited to the period of default until the unpaid month's duty was discharged. Board clarifications were relied on to confirm that differential duty could not be extended to the entire remaining financial year in the absence of a contrary statutory mandate. The resulting duty redetermination on that basis was sustained, and the departmental challenge failed.

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Issues: Whether, on default in payment of duty under the Pan Masala Packing Machine (Capacity Determination and Collection of Duty) Rules, 2008, differential duty was payable only for the period of default on the available packing machines, or for the entire remaining financial year as contended by the Revenue.

Analysis: The demand arose under Section 3A of the Central Excise Act, 1944 and Rule 9 of the Pan Masala Packing Machine (Capacity Determination and Collection of Duty) Rules, 2008, as amended by Notification No. 30/2008-CE (N.T.) dated 01.07.2008. The adjudicating authority had relied on the Board's clarifications dated 27.07.2009 and 20.04.2010, which stated that a default for one month would not be treated as a default for the entire remaining financial year, and that the default would continue only until the duty for the said month was paid. The same view had already been accepted in the respondent's own case.

Conclusion: Differential duty was payable only for the period of default on the available packing machines, and not for the entire remaining financial year. The Revenue's appeal failed.

Final Conclusion: The order redetermining duty on the basis of the Board's clarifications was sustained, and the departmental challenge was rejected.

Ratio Decidendi: Where the governing circulars and clarifications interpret a capacity-based duty scheme to limit the consequence of default to the period until the defaulted monthly duty is paid, the demand cannot be extended to the entire remaining financial year absent contrary statutory mandate.

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