Inter-unit duty adjustments on internal transfers can offset excess and short payment before final refund or demand is determined.

Inter-unit transfers of goods within the same company, without sale to independent buyers, were treated as a situation where excess duty paid on some clearances could be adjusted against short payment on others before working out the final duty position. The Tribunal applied earlier authority permitting set-off in such non-market transfers and held that the unjust enrichment objection did not defeat the adjustment exercise at that stage. Refund, demand, and any interest liability were to be determined only after the adjustment was made in accordance with law.

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Issues: Whether, in the case of inter-unit transfer of goods of the assessee's own company without sale to an independent buyer, excess duty paid in some clearances could be adjusted against short payment in other clearances and the consequent refund or demand be worked out thereafter.

Analysis: The clearances were between related units and no sale to outside buyers was involved. The excess payment and short payment arose from the same course of clearances and the Tribunal treated the situation as one fit for adjustment, relying on earlier authority that permitted set-off where the goods were not sold in the market. The contrary view based on unjust enrichment was held inapplicable on the facts because the adjustment issue preceded the final determination of refund or demand.

Conclusion: The excess duty was to be adjusted against the short payment and only thereafter was the refund or demand to be decided in accordance with law, including any interest liability. The issue was decided in favour of the assessee to that extent.

Final Conclusion: The appeals succeeded only to the extent of permitting adjustment of excess and short payment of duty, leaving the ultimate refund and demand determination to the adjudicating authority.

Ratio Decidendi: Where clearances occur by inter-unit transfer without sale, excess duty paid on some clearances may be adjusted against short payment on others before deciding the final duty liability and any refund question.

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