No machinery provision for recovery defeats duty demand under Rule 57CC(9) for inputs used in exempted goods.

Recovery of proportionate duty or an 8% amount under Rule 57CC(9) for inputs used in exempted goods was held unsustainable for the relevant period because no machinery provision existed to authorise such recovery. The Tribunal noted that, in the absence of an enabling recovery mechanism in the rule as applicable during the dispute period, the demand could not be enforced. Relying on earlier decisions on the same point, it concluded that the demand was not legally recoverable and was set aside in favour of the assessee.

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Issues: Whether proportionate duty or 8% amount was recoverable under Rule 57CC(9) in respect of inputs used in the manufacture of exempted goods, when no machinery provision for such recovery existed for the relevant period.

Analysis: The demand was based on the requirement to reverse proportionate duty at 8% on inputs used for exempted goods. The Tribunal noted that, for the period in dispute, the Revenue had not incorporated any provision enabling recovery of the amount. In the absence of a machinery provision, and following the ratio of earlier decisions on the same point, the demand could not be sustained.

Conclusion: The recovery under Rule 57CC(9) was not sustainable for the relevant period and the demand was set aside in favour of the assessee.

Ratio Decidendi: A duty demand cannot be enforced where the statute or rule contains no machinery provision for its recovery for the relevant period.

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