Captive consumption duty on cotton yarn required factual verification of the quantity issued and duty paid before liability could be fixed.

Duty on captively consumed cotton yarn depended on whether liability was computed on the yarn issued for captive use or only on the quantity actually contained in the finished cotton fabrics. The discussion linked the general demand under Rule 9 with the deferred payment mechanism under Rule 49A, noting that duty could be discharged at removal of the fabrics, but the record did not verify whether duty had been paid on the full yarn quantity issued for captive consumption. Because the exact duty-paid quantity was unascertained, the matter required remand for fresh factual examination of the yarn quantity and duty payment.

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Issues: Whether duty liability on captively consumed cotton yarn was to be determined on the quantity issued for captive consumption or only on the quantity actually contained in the cotton fabrics manufactured therefrom, and whether the matter required remand for verification of the relevant quantity.

Analysis: The dispute turned on the interaction between the general demand under Rule 9 and the alternative deferred payment mechanism under Rule 49A. The appellate authority had accepted the legal plea that duty could be discharged at the stage of removal of the cotton fabrics, but the factual aspect had not been examined, namely whether duty had been paid on the full quantity of yarn issued for captive use or only on the quantity ultimately contained in the fabrics. Since the record did not establish the exact quantity on which duty had been discharged, the correctness of the demand could not be finally determined without such verification.

Conclusion: The matter was required to be sent back for fresh examination of the quantity of yarn and the duty paid thereon.

Final Conclusion: The dispute was not finally decided on merits and was restored for factual determination, with the assessee obtaining a remand for reconsideration.

Ratio Decidendi: Where the legal entitlement to deferred payment is accepted but the exact duty-paid quantity remains unverified, the proper course is remand for factual ascertainment rather than final adjudication of liability.

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