Pro rata duty abatement under compounded levy rules applies once sealing and intimation conditions are satisfied; full monthly payment is not required first.

Rule 10 of the Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 provides proportionate abatement where notified goods are not produced for a continuous period of fifteen days or more, provided prior intimation is given and the machines are sealed under departmental supervision. The assessee had complied with these conditions, and the record showed that the machines remained non-operational during the sealed period. The rule does not require full monthly duty to be paid first as a condition for claiming abatement. Consistent with the cited High Court view, the scheme treats abatement as a reduction in duty, not a refund, so duty may be computed only for the period of actual operation once the rule conditions are met.

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Issues: Whether, under Rule 10 of the Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008, the assessee was required to pay duty for the full month first and then claim abatement for the period when the packing machine remained sealed and not in operation, or whether duty could be computed only for the days of actual operation.

Analysis: Rule 10 grants abatement on a proportionate basis where notified goods are not produced for a continuous period of fifteen days or more, subject to prior intimation and sealing of the machines under departmental supervision. The record showed that the assessee had followed the prescribed procedure, including advance intimation, sealing, and resealing under supervision, and there was no dispute that the machines were not operated during the sealed period. The rule contains no requirement that full monthly duty must first be paid as a condition precedent to claiming abatement. The settled view in the cited High Court decisions was that abatement under this scheme is a reduction of duty and not a refund, and that the assessee is entitled to compute duty on a proportionate basis for the period of non-operation once the rule conditions are satisfied.

Conclusion: The assessee was entitled to pro rata abatement without first paying the full monthly duty, and the duty demand for the abated period was unsustainable.

Ratio Decidendi: Where the statutory abatement scheme for compounded levy duty is complied with, and the rules do not prescribe any separate procedure requiring prior payment of full monthly duty, the assessee may lawfully avail proportionate abatement for the period of non-production.

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