Compounded levy scheme cannot be exited mid-year; separate castings demand also failed for want of confirming order and cross-appeal.

A manufacturer that had opted for the compounded levy scheme under Rule 96ZO(3) could not discontinue it during the same financial year or seek assessment under Section 3 on an apportioned furnace-capacity basis for non-notified goods. Duty remained payable under Section 3A on the capacity fixed by the Commissioner, and any switch to actual production basis arose only after the financial year ended. A separate demand relating to steel castings could not be enforced in appeal because the impugned order contained no confirming finding on that demand and the department filed no cross-appeal. The challenge to the compounded levy scheme therefore failed, while the castings demand was left unenforced in this appeal.

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Issues: (i) Whether the appellants, having opted for the compounded levy scheme under Rule 96ZO(3), could discontinue that scheme during the same financial year and seek assessment under Section 3 of the Central Excise Act, 1944, with apportionment of capacity on the basis of production of non-notified goods. (ii) Whether the duty demand relating to steel castings could be sustained in the absence of a confirming finding in the impugned order and without a cross-appeal by the department.

Issue (i): Whether the appellants, having opted for the compounded levy scheme under Rule 96ZO(3), could discontinue that scheme during the same financial year and seek assessment under Section 3 of the Central Excise Act, 1944, with apportionment of capacity on the basis of production of non-notified goods.

Analysis: The production records showed that notified goods, namely non-alloy steel ingots, were manufactured in predominance during the relevant period. The scheme under Section 3A was applicable on the basis of the capacity fixed by the Commissioner, and the legal position did not permit a mid-year exit from the compounded levy arrangement. The scheme also did not provide for reducing the duty liability by apportioning furnace capacity on the footing that part of the capacity was used for non-notified goods. The option to pay duty on actual production basis could arise only after the financial year ended.

Conclusion: The issue is decided against the appellants, and the duty liability under Section 3A was rightly sustained for the relevant period.

Issue (ii): Whether the duty demand relating to steel castings could be sustained in the absence of a confirming finding in the impugned order and without a cross-appeal by the department.

Analysis: Steel castings were not notified goods under Section 3A and were otherwise assessable under Section 3. However, the impugned order did not contain a specific confirmation of the separate duty demand on that part of the production, and the department had not filed any cross-appeal to cure that omission. In that situation, no enforceable demand could be fastened on the appellants in this appeal.

Conclusion: The issue is decided in favour of the appellants to the extent that the separate castings demand was not enforced in the absence of a confirming order and cross-appeal.

Final Conclusion: The challenge to the applicability of the compounded levy scheme failed, while the separate castings demand could not be enforced in this appeal for want of a confirming finding and cross-appeal; overall, the appeal was rejected.

Ratio Decidendi: Where a manufacturer has validly come under the compounded levy scheme and notified goods are produced in predominance during the relevant period, duty remains payable under Section 3A on the capacity fixed, without any mid-year opt-out or apportionment of capacity for non-notified goods; a separate demand cannot be enforced in appeal without a confirming adjudication and proper cross-appeal.

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