Bank guarantee encashment unsustainable after demand was set aside; fresh provisional assessment could still be finalised.

Where the original demand had already been set aside in appeal, recovery by encashment of the bank guarantee could not be sustained because the demand no longer survived. The recovered amount was therefore directed to be returned. At the same time, the revenue was allowed to proceed with fresh finalisation of the provisional assessment pursuant to the show cause notice, and the petitioners were required to furnish an equivalent fresh bank guarantee pending completion of that process.

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Issues: Whether the encashment of the bank guarantee could be sustained after the original demand had been set aside in appeal, and whether the provisional assessment could be finalised afresh pursuant to the show cause notice.

Analysis: The original order giving rise to the demand had already been set aside in appeal, with the consequence that the demand itself no longer survived. In that situation, the recovery by encashment of the bank guarantee could not be sustained. At the same time, the revenue was permitted to proceed with fresh finalisation of the provisional assessment pursuant to the show cause notice, and the petitioners were directed to keep the amount secured by furnishing an equivalent bank guarantee until the process was completed.

Conclusion: The encashment of the bank guarantee was held unsustainable, the recovered amount was directed to be returned, and the petitioners were required to furnish a fresh bank guarantee pending finalisation of the provisional assessment.

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