Refund of excise duty on unpaid escalation bills where the buyer never accepted the revised contract price.

Where an escalation clause existed in the purchase order but the buyer neither accepted nor paid the revised price, duty paid on the escalation bills was refundable. The duty had been discharged only in anticipation of the buyer agreeing to the higher amount, and because the contractual price was never effectively modified, there was no basis to retain excise duty on the unpaid escalation component. Refund was therefore available on the amount attributable to the unpaid escalation bills.

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Issues: Whether the assessee was entitled to refund of central excise duty paid on escalation bills when the buyer did not accept or pay the escalated price.

Analysis: The purchase order contained an escalation clause, but the buyer did not agree to pay the escalated amount and no payment was made towards the escalation bills. The duty had been paid only in anticipation of the buyer agreeing to the revised price. In these circumstances, the contractual price was not effectively modified and there was no basis to deny refund of the duty paid on the unpaid escalation amount.

Conclusion: The assessee was entitled to refund of the duty paid on the escalation bills.

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