Provisional assessment requires set-off of excess duty against short payment; only net differential duty can be demanded.

On finalisation of provisional assessment, excess duty paid on some clearances must be adjusted against short payment on other clearances, and only the net differential, if any, can be demanded. Where goods were supplied to a sister unit for captive consumption and valuation was later finalised on the applicable cost basis, the exercise was treated as revenue neutral. The demand for differential duty was therefore not sustainable because the overall assessment had to reflect the net position after set-off of excess and short payments.

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Issues: Whether, on finalisation of provisional assessment, the excess duty paid on some clearances could be adjusted against short payment on other clearances and, if so, whether the demand for differential duty was sustainable.

Analysis: The dispute arose from provisional assessment of goods supplied to a sister unit for captive consumption, where valuation was worked out on the basis applicable to captive clearances and the cost of production was finalised later. On finalisation, some clearances showed excess payment and others showed short payment. The Tribunal held that in such a situation the short payment had to be adjusted against the excess payment, and only the net differential, if any, could be demanded. Since the exercise was one of finalisation of provisional assessment, the overall position was revenue neutral and the demand could not be sustained.

Conclusion: The excess duty was required to be adjusted against the short payment, and the demand for differential duty was not justified.

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