Refund of duty on duty-free procurement upheld where final appellate entitlement was recognised and limitation ran from that order.

A final appellate order recognising duty-free procurement entitlement entitled the 100% EOU to refund of duty paid on LDO procured during the pendency of the dispute. Since the unit was not legally required to pay duty once that entitlement was affirmed and the Revenue did not challenge the earlier order, the payment was refundable. Limitation was computed from the date the entitlement was finally recognised, so the refund claim filed within one year of that order was held to be within time. The Revenue's challenge therefore failed and the refund was maintained.

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Issues: Whether duty paid on LDO procured by a 100% EOU during the pendency of the appeal was refundable after the appellate order recognised entitlement to duty-free procurement, and whether the refund claim was barred by limitation.

Analysis: The respondent was a 100% export oriented unit entitled to procure LDO without payment of duty under Notification No. 1/95. That entitlement had already been affirmed in an earlier appellate order which had attained finality, and the Revenue had not challenged that order. Duty paid on inputs procured during the pendency of the dispute was therefore payment made when the unit was not legally required to pay duty. The later refund claims were filed on the strength of that final appellate determination and related to procurements made while the issue was under litigation. The claim was also held to be within time because the cause for refund arose only upon the appellate order in favour of the respondent, and the refund application was filed within one year of that order.

Conclusion: The refund of duty was admissible and the claim was not time-barred.

Final Conclusion: The Revenue's challenge failed, and the respondent retained the refund benefit arising from the final appellate determination.

Ratio Decidendi: Where a final appellate order establishes that duty-free procurement was permissible, duty paid during the pendency of the dispute on such procurement is refundable, and limitation is computed from the date on which the entitlement is finally recognised.

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