Refundable pre-deposit credit in PLA did not justify duty and interest demand where refund was otherwise due.

A pre-deposit made under Section 35F was refundable after the assessee succeeded in the earlier appeal with consequential relief. Although the assessee took credit of the refundable amount in the PLA before the cash refund was formally regularised, the Department had not acted on the refund request even after a subsequent letter, and the governing instruction contemplated refund on a simple application. On these facts, the procedural lapse in taking credit was held insufficient to treat the clearances as duty-free or to sustain a demand of duty and interest under Rule 8. The demand was set aside and the original authority's order restored.

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Issues: Whether duty and interest could be demanded on the basis that the appellant had taken credit of the pre-deposit amount in the PLA before cash refund, and whether the order of the Commissioner (Appeals) was liable to be set aside.

Analysis: The appellant had made a pre-deposit under Section 35F and had already succeeded in the earlier appeal with consequential relief. The amount was admittedly refundable, and the departmental instruction contemplated refund on a simple letter. Although the appellant took credit in the PLA before the refund was formally regularised, the Department did not act on the request even after the subsequent letter. In these peculiar facts, the procedural lapse in taking credit did not justify treating the clearances as duty-free and raising a demand of duty with interest under Rule 8.

Conclusion: The demand was not sustainable, and the order of the Commissioner (Appeals) was set aside by restoring the order of the original authority.

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