Refund of duty on LDO became allowable once duty-free procurement entitlement attained finality and limitation ran from the appellate order.

Duty paid on LDO procured by a 100% EOU during the pendency of dispute was held refundable once the entitlement to duty-free procurement under Notification No. 1/95 had attained finality. The duty was paid only because an earlier order required payment while the issue remained contested; after the appellate finding confirmed eligibility, the payment became refundable. The refund claim was also held to be within limitation because the right to refund arose only from the appellate order recognising entitlement, and the claim was filed within one year of that order. The refund was therefore sustained and the Revenue's challenge failed.

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Issues: (i) Whether duty paid on LDO procured by a 100% EOU during the pendency of appeal was refundable after the eligibility to procure LDO without duty payment had attained finality; (ii) Whether the refund claim was barred by limitation.

Issue (i): Whether duty paid on LDO procured by a 100% EOU during the pendency of appeal was refundable after the eligibility to procure LDO without duty payment had attained finality.

Analysis: The respondent was held eligible to procure LDO without payment of duty under Notification No. 1/95. That finding had attained finality, and the duty had been paid only because the earlier order required such payment during the period when the matter was under dispute. Once the eligibility was upheld, the duty paid on the inputs procured during the pendency of the dispute became refundable.

Conclusion: The refund of duty paid on LDO was allowable in favour of the assessee.

Issue (ii): Whether the refund claim was barred by limitation.

Analysis: The refund claim arose only after the appellate order recognised the respondent's entitlement to procure LDO without duty. The claim was filed within one year from that appellate order, and therefore was within time.

Conclusion: The refund claim was not barred by limitation.

Final Conclusion: The order allowing refund was sustained, and the Revenue's challenge failed.

Ratio Decidendi: Where duty is paid on inputs only because of a subsisting adverse order, but the assessee's entitlement to duty-free procurement is later upheld and attains finality, the duty so paid is refundable and the refund period runs from the appellate order giving rise to the claim.

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