Cum-duty price recomputation applies even where duty adjustment against a later demand is rejected for ineligible exemption

Where the assessee was not entitled to exemption during the disputed period, duty already paid for that period could not be adjusted against the later confirmed demand, because the enhanced exemption limit applied only from 27-4-1989 and the earlier clearance limit was not satisfied. The demand nevertheless had to be recomputed on a cum-duty basis, since the sale realization was treated as inclusive of duty and appropriate duty deduction was required from the gross price. The CESTAT thus maintained the duty confirmation on the adjustment issue while directing limited requantification on the cum-duty issue.

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Issues: (i) Whether the duty confirmed for the period 1-4-1989 to 26-4-1989 could be adjusted against duty already paid, and (ii) whether the demand was required to be reworked by treating the sale realization as cum-duty price.

Issue (i): Whether the duty confirmed for the period 1-4-1989 to 26-4-1989 could be adjusted against duty already paid.

Analysis: The enhanced eligibility limit under Notification No. 119/89-C.E. became effective only from 27-4-1989. For the disputed period, the assessee had not satisfied the then applicable clearance limit under Notification No. 175/86-C.E., and there was no entitlement to exemption. The earlier decision permitting adjustment applied where duty had been paid during a period when exemption was otherwise available, which was not the position here.

Conclusion: The claim for adjustment was rejected and the duty confirmation for the period in question was upheld.

Issue (ii): Whether the demand was required to be reworked by treating the sale realization as cum-duty price.

Analysis: The amount realized from buyers had to be taken as inclusive of duty, and the demand required recomputation by granting duty deduction from the gross realization. This was treated as a separate relief from the question of exemption eligibility.

Conclusion: The demand was directed to be requantified on a cum-duty basis with appropriate duty deduction.

Final Conclusion: The appeal succeeded only to the limited extent of cum-duty recomputation, while the substantive challenge to the duty demand failed.

Ratio Decidendi: Where the assessee was not entitled to exemption during the disputed period, duty paid for that period cannot be adjusted against a later confirmed demand, but the demand must still be recomputed on a cum-duty basis if the sale price included duty.

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