Excise duty demand fails where the valuation basis collapses, and payment during dispute cannot survive without protest label

The demand for excise duty on the value of bought out flaps included in tyres and tubes could not be sustained once the appellate finding that flap value was not includible in assessable value had attained finality. Duty already paid during the dispute was not recoverable merely because it was not paid under protest, since the underlying demand itself had failed on merits. The related penalty and interest also fell with the unsustainable duty demand.

---

---

Issues: Whether the demand of excise duty already paid by the assessee could be sustained merely because it was not paid under protest, after the appellate authority had held that the value of bought out flaps was not includible in the assessable value of tyres and tubes.

Analysis: The dispute arose from inclusion of the value of bought out flaps in the assessable value of tyres and tubes cleared as sets. The appellate authority had categorically held that the flap value was not includible, and that finding had attained finality as it was not challenged by the Revenue. Once the very basis of the demand failed, the confirmation of duty already paid could not survive on the sole ground that the payment was not made under protest. A payment made during the course of a contested demand proceeding could not be treated as a voluntary and independent liability when the underlying demand itself was unsustainable. In the same setting, the consequential levy of penalty and interest also could not stand.

Conclusion: The confirmation of duty on the amount already paid was unsustainable. The appeal was allowed and the assessee succeeded.

Final Conclusion: Once the substantive demand failed on merits, the related confirmation of duty, penalty, and interest could not be maintained.

Ratio Decidendi: Where the foundation of a duty demand is held not to exist, an amount paid during the pendency of the dispute cannot be upheld as recoverable merely on the ground that it was not described as paid under protest.

---