Refund Approved: Excise Duty on Dismantled Machinery to Be Returned as No Duty Was Levied Under Relevant Rules.

The CEGAT upheld the assessee's claim, directing a refund of excise duty paid for a dismantled, non-operational machine, as no duty was leviable under the Central Excise Rules for the period in question. The court affirmed this decision, ruling in favor of the assessee, rejecting the revenue's contention, and concluding no unjust enrichment occurred.

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Issues: Whether, under the compounded levy scheme for cold rolling machines, duty could be demanded for a machine that had been dismantled and was not operating during the relevant period, and whether excess duty so collected was refundable under Section 11B of the Central Excise Act, 1944.

Analysis: The special procedure under Rule 96ZA and Rule 96ZB of the Central Excise Rules, 1944 was held to operate on the basis of actual machines in existence and the estimated production attributable to them. Rule 96ZC required declaration of the maximum number of machines and intimation of changes in machine strength, but it did not authorise levy on a machine that had ceased to exist or produced no goods. The charging provisions under Section 3 of the Central Excise Act, 1944 were taken as controlling, and excise duty was treated as leviable only on manufacture. Since no production took place from the dismantled machine during the period in question, the demand made on an estimated basis for that machine was found to be beyond the scope of the levy. The Court also held that refund was not barred, because when no goods were manufactured there was no basis to invoke unjust enrichment on a notional passing on of duty.

Conclusion: The reference was answered in the affirmative in favour of the assessee and against the Revenue; excess duty collected for the period when the machine was not in operation was refundable under Section 11B of the Central Excise Act, 1944.

Ratio Decidendi: Under the compounded levy scheme, duty cannot be levied on a machine that has been dismantled and on which no manufacture has taken place, and excess duty collected in such circumstances is refundable if the levy itself was not authorised by law.

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