Compounded levy under excise law excludes general limitation rules, and capacity must be based on the assessee's own machinery.

A special compounded levy scheme under Section 3A of the Central Excise Act operates as a self-contained code for determination, payment, interest and penalty, so the general notice and limitation machinery under Section 11A does not apply to recovery of duty under that scheme. Capacity-based duty under the Hot Re-rolling Steel Mills Annual Capacity Determination Rules, 1997 must be fixed on the basis of the machinery actually installed in the assessee's own unit, not by reference to parameters of other manufacturers. The challenged capacity determinations were therefore set aside for fresh redetermination in the identified matters, with the remaining appeals rejected.

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Issues: (i) whether the time limit and notice procedure under Section 11A of the Central Excise Act applied to recovery of duty payable under the compounded levy scheme for hot re-rolling steel mills; (ii) whether annual capacity of production could be determined on the basis of parameters of other manufacturers instead of the machinery installed in the assessee's own unit.

Issue (i): whether the time limit and notice procedure under Section 11A of the Central Excise Act applied to recovery of duty payable under the compounded levy scheme for hot re-rolling steel mills.

Analysis: The scheme under Section 3A of the Central Excise Act and the Hot Re-rolling Steel Mills Annual Capacity Determination Rules, 1997 is a special and self-contained levy mechanism. The duty liability arises under that scheme and the rules provide their own machinery for determination, payment, interest and penalty. In that context, the general recovery and limitation provisions of Section 11A are not attracted to recoveries under the compounded levy scheme.

Conclusion: The objection based on Section 11A failed and the recovery under the compounded levy scheme was held not to be time-barred under that provision.

Issue (ii): whether annual capacity of production could be determined on the basis of parameters of other manufacturers instead of the machinery installed in the assessee's own unit.

Analysis: Capacity-based duty under the scheme depends on the machinery actually installed in each mill. Determination by reference to other manufacturers' parameters was held to be irrelevant. For the affected appeals, the matter required fresh determination on the correct factual basis, with an opportunity to the assessees to present their case.

Conclusion: The capacity determinations in the specified appeals were set aside for fresh redetermination, while the remaining appeals were rejected.

Final Conclusion: The reference was answered against the assessees on the Section 11A issue, but relief was granted in part by directing fresh capacity redetermination in the identified appeals, with the rest of the appeals dismissed.

Ratio Decidendi: A special compounded levy scheme with its own statutory machinery excludes resort to the general limitation and recovery mechanism of Section 11A, and capacity-based levy must be determined on the basis of the assessee's own installed machinery.

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