Compounded levy duty cannot be imposed on permanently closed furnaces when reduced capacity is established and redetermination is sought.

Under the compounded levy scheme, duty cannot be demanded on furnaces that were permanently closed where the assessee had informed the authorities and sought redetermination of capacity in accordance with the rules. The record showing non-production, together with the request to dismantle the closed furnaces, supported reduced production capacity, and the demand was not sustainable merely because permission to dismantle had not yet been granted. Authorities dealing with temporary closure or alternative working arrangements were distinguished. The demand, penalty, and interest based on the closed furnaces were set aside.

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Issues: Whether, under the compounded levy scheme, duty could be demanded on the capacity of furnaces that had been permanently closed and for which permission to dismantle had been sought but not granted.

Analysis: The appellant had informed the excise authorities before and during the relevant period that two furnaces were permanently closed, and the records of visiting officers also reflected that those furnaces were not in production. The scheme permitted duty to be determined with reference to changed production capacity, and the Court treated the request to dismantle the closed furnaces as part of the factual sequence showing permanent cessation of use. The demand was therefore not sustainable merely because the authorities did not act on the dismantling request. The authorities relied upon by the Revenue were distinguished as dealing with temporary closure or with working of alternative furnaces, not with permanent reduction of capacity.

Conclusion: The demand, penalty, and interest based on the closed furnaces could not be sustained, and the issue was decided in favour of the assessee.

Final Conclusion: The impugned order was set aside and the assessee obtained the consequential relief flowing from acceptance of the appeal.

Ratio Decidendi: Under the compounded levy scheme, duty cannot be fastened on machinery that has been permanently closed where the reduced capacity is established and the assessee has sought redetermination in accordance with the rules.

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