Machine-based duty demand fails where the unused cold rolling machine was dismantled and not used during the disputed period.

Duty under a machine-based special procedure could not be demanded for a cold rolling machine that had been dismantled and was not used during the relevant period, where the assessee had intimated the department and duty was paid only on the two machines actually operating. As the department did not dispute the dismantling or prove use of all three machines, the demand failed. Once the duty demand was unsustainable, the related interest and penalty also could not survive and were set aside.

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Issues: Whether duty was payable under the special procedure for a cold rolling machine that had been dismantled and was not used during the disputed period.

Analysis: The notification granted an option to pay duty on the basis of the number of cold rolling machines installed for manufacture of stainless steel pattas/pattis. The assessee had informed the department that one machine was not working and was being dismantled, and duty was discharged only for the two machines actually used. The department did not dispute the dismantling or establish use of all three machines during the disputed period. Duty under the notification could not be demanded for a machine that was not used for manufacture, and the related interest and penalty could not survive once the demand failed.

Conclusion: The duty demand was unsustainable and is set aside, along with the interest and penalty.

Ratio Decidendi: Duty under a machine-based special procedure cannot be demanded for a machine that was not used for manufacture during the relevant period when the assessee has intimated the department and the factual position is not disputed.

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