Capacity-based excise levy: abatement requires full factory closure, and an elected compounding procedure bars later statutory relief.

Section 3A of the Central Excise Act was treated as a valid capacity-based levy, and the constitutional challenge failed. Abatement under Section 3A(3) was unavailable because the statutory scheme required closure of the factory as a whole for the prescribed continuous period, not merely shutdown of one furnace while production continued elsewhere. Relief under Section 3A(4) was also unavailable after the assessee elected to pay duty under Rule 96ZO(3), because the two procedures were alternative and the chosen mode could not later be bypassed. The writ petition was therefore rejected.

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Issues: (i) Whether Section 3A of the Central Excise Act, 1944, introducing levy of duty on the basis of annual capacity of production for notified goods, was ultra vires. (ii) Whether abatement under Section 3A(3) was available when only one furnace in the factory was closed and the factory as a whole was not closed for the prescribed continuous period. (iii) Whether an assessee who had opted for payment of duty under Rule 96ZO(3) of the Central Excise Rules, 1944 could still claim relief under Section 3A(4).

Issue (i): Whether Section 3A of the Central Excise Act, 1944, introducing levy of duty on the basis of annual capacity of production for notified goods, was ultra vires.

Analysis: The levy under Section 3A operated notwithstanding Section 3, and the scheme had already been upheld in the connected proceedings before the Supreme Court. The challenge to the constitutional validity of Section 3A did not survive for independent examination in the present matter. The Court treated the assessment for the relevant period as governed by Section 3A on the basis of actual production for the whole financial year.

Conclusion: The challenge to the validity of Section 3A failed and was rejected, in favour of Revenue.

Issue (ii): Whether abatement under Section 3A(3) was available when only one furnace in the factory was closed and the factory as a whole was not closed for the prescribed continuous period.

Analysis: The proviso to Section 3A(3) and Rule 96ZO(2) contemplated abatement only when the factory producing notified goods did not produce such goods during a continuous period of not less than seven days and the prescribed intimation and verification conditions were fulfilled. The Court held that the statutory scheme referred to closure of the factory as a whole, not merely closure of one of several furnaces. Since production continued in the remaining unit when one furnace was closed, the factual condition for abatement was not satisfied.

Conclusion: Abatement under Section 3A(3) was not available, against the assessee.

Issue (iii): Whether an assessee who had opted for payment of duty under Rule 96ZO(3) of the Central Excise Rules, 1944 could still claim relief under Section 3A(4).

Analysis: Rule 96ZO(3) and Section 3A(4) were treated as alternative modes of determining and discharging duty liability. Once the assessee elected to pay duty on the compounding basis under Rule 96ZO(3), the statutory benefit of re-determination under Section 3A(4) stood excluded. The Court applied the principle that one of two alternative procedures, once chosen, cannot be bypassed to invoke the other.

Conclusion: Relief under Section 3A(4) was not available after opting for Rule 96ZO(3), against the assessee.

Final Conclusion: The writ petition was without merit because the statutory challenge failed, abatement was not available on the facts, and the assessee could not resile from the procedure it had elected under the rules.

Ratio Decidendi: Where a fiscal scheme provides alternative statutory procedures, the assessee is bound by the procedure chosen, and abatement under a capacity-based levy provision is available only on satisfaction of the prescribed condition of closure of the factory as a whole for the stipulated continuous period.

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