Provisional compounded levy duty must be credited against final excise liability; no separate differential demand survives.

Rule 96ZNA permitted an independent textile processor to operate the compounded levy scheme provisionally while its application was pending. If the application was later rejected, the duty already paid during the provisional period was required to be adjusted against the duty otherwise payable for the same period. The text states that, where the assessee had filed returns and discharged duty under the provisional scheme, the revenue could not insist on a separate differential demand without granting credit for that payment. On that basis, the relevant liability was treated as satisfied by adjustment under the applicable duty provisions.

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Issues: Whether duty paid by an independent textile processor under the provisional operation of Rule 96ZNA, after applying for the special procedure and before rejection of the application, was required to be adjusted against the duty liability computed under the otherwise applicable provisions, so that no differential demand survived.

Analysis: The special procedure under Rule 96ZNA permitted the assessee to avail the compounded levy arrangement on a provisional basis pending decision on the application. On rejection of the application, the assessee ceased to be eligible for the special procedure from the specified commencement date, but the duty already paid under the provisional regime was statutorily required to be adjusted against the duty otherwise payable. Since the assessee had filed returns and discharged duty under the provisional scheme during the pendency of the application, the revenue could not insist on a separate differential demand for the same period without giving credit for the duty already paid under the special procedure. The liability for the relevant period stood satisfied on such adjustment.

Conclusion: The differential demand was not sustainable. The duty paid under the provisional operation of Rule 96ZNA had to be adjusted against the duty liability under Section 4, and the appeal succeeded.

Ratio Decidendi: Where a special excise levy scheme permits provisional availment pending approval and expressly provides for adjustment of duty on rejection, the duty paid during the provisional period must be given credit against the final duty liability for the same period, and no separate demand can be sustained for the adjusted amount.

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