Monthly compounded levy cannot be split into daily liability for a mid-month start absent express rule-based authority.

Rule 96ZQ requires compounded levy duty to be determined and paid on a monthly basis, with instalments linked to the month rather than to each day. Where the scheme commenced in the middle of December 1998, the remaining period could not be split into a separate daily pro rata computation unless the rule expressly permitted it. The short month was only the result of mid-month commencement, not a basis for fragmenting the levy. On that reasoning, the demand based on daily calculation was unsustainable, and the penalty founded on that demand could not stand.

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Issues: Whether duty payable under Rule 96ZQ(3) of the Hot Air Stenter Independent Processors Annual Capacity Determination Rules, 1998 for the period from 16-12-1998 to 31-12-1998 could be computed on a daily basis so as to sustain the demand and penalty.

Analysis: The scheme under Rule 96ZQ contemplates determination of annual capacity and payment of duty on a monthly basis, with half the monthly duty payable by the 15th and the balance by the end of the month. The fact that the compounded levy provisions came into force in the middle of the month did not justify treating the liability for the remaining days of December 1998 as a separate daily calculation. The shorter period was only a consequence of commencement during the month, and the monthly levy could not be fragmented into a pro rata daily computation. The demand was therefore unsustainable, and the penalty founded on that demand could not stand.

Conclusion: The demand and penalty were not justified. The issue was decided in favour of the assessee.

Final Conclusion: The appeal succeeded and the impugned order confirming the demand and penalty was set aside.

Ratio Decidendi: Where a fiscal scheme prescribes duty on a monthly basis, liability for a part of the month on commencement of the scheme cannot be recomputed on a daily pro rata basis unless the rule expressly so provides.

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