Compounded levy abatement requires strict compliance; Rule 96ZO payment scheme cannot be mixed with abatement benefits.

Under the compounded levy scheme in Rule 96ZO, abatement under sub-rule (2) was conditional and required strict compliance with prescribed intimations for closure, recommencement and stock particulars; incomplete or inconsistent letters were insufficient, and a manufacturer opting for payment under Rule 96ZO(3) could not combine that scheme with abatement benefits. The general limitation under Section 11A was held inapplicable to recovery governed by the special Rule 96ZO machinery, and the demand was treated as timely. A plea of no duty liability after 21-3-98 based on dispossession and closure failed for want of proof. Penalty was upheld only for the later period, with substantial reduction for the earlier period.

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Issues: (i) Whether abatement under Rule 96ZO(2) could be granted on the basis of the intimation letters and surrounding material; (ii) Whether the demand of duty was barred by limitation under Section 11A in a proceeding governed by Rule 96ZO; (iii) Whether no duty was payable after 21-3-98 on the plea of dispossession and closure; (iv) Whether the penalty was sustainable in full.

Issue (i): Whether abatement under Rule 96ZO(2) could be granted on the basis of the intimation letters and surrounding material.

Analysis: The abatement facility under Rule 96ZO(2) was held to be conditional and meant to enable effective departmental verification of closure and reopening of the furnace. The required intimations had to be given in the prescribed manner, including the timing of closure or recommencement and the relevant stock particulars. The intimation letters were found not to satisfy those requirements consistently and, in any event, a manufacturer opting for the composite payment scheme under Rule 96ZO(3) could not claim a hybrid benefit of abatement.

Conclusion: Abatement was not admissible and the rejection of the claim was upheld against the assessee.

Issue (ii): Whether the demand of duty was barred by limitation under Section 11A in a proceeding governed by Rule 96ZO.

Analysis: The recovery arose under the special compounded levy scheme of Rule 96ZO, which contains its own machinery for payment, interest and penalty. In that setting, the general limitation under Section 11A was held not to govern the recovery. The plea was also treated as not having been raised at the proper stage and, on merits, was found unsustainable.

Conclusion: The demand was not barred by limitation and the challenge failed against the assessee.

Issue (iii): Whether no duty was payable after 21-3-98 on the plea of dispossession and closure.

Analysis: The letter relied upon by the assessee was treated as an intimation of closure and not proof of dispossession. The alleged dispossession was not established by evidence. The departmental record showed that electricity supply was disconnected for a substantial later period, and that period was already excluded from the duty demand.

Conclusion: The plea of no duty liability after 21-3-98 was rejected against the assessee.

Issue (iv): Whether the penalty was sustainable in full.

Analysis: Penalty under the scheme followed the statutory default, but the amended penal provision relied upon for the entire period was not applicable to the whole demand period. The Tribunal therefore held that penalty could not be sustained for the period prior to the effective operation of the amended provision, while it remained leviable for the later period.

Conclusion: The penalty was reduced and sustained only in part, to the extent attributable to the later period.

Final Conclusion: The rejection of abatement and the demand of duty with interest were maintained, but the penalty was modified by substantial reduction, so the assessee obtained only partial relief.

Ratio Decidendi: Under the compounded levy scheme, the conditions for abatement are mandatory and must be strictly complied with, and a manufacturer who opts for payment under Rule 96ZO(3) cannot combine that scheme with abatement benefits under Rule 96ZO(2).

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