Demand based on a withdrawn circular cannot survive, and the resulting adjudication order is unsustainable.

A departmental demand founded on an earlier circular could not survive once that circular had been withdrawn. The Rajasthan High Court noted that the demand originated from the November 2001 circular, but the department later withdrew it through Circular No. 870/08/2008-CX dated 16.05.2008. Because the source of the demand had ceased to operate, the adjudication order based on the withdrawn circular was unsustainable and liable to be quashed.

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Issues: Whether the demand raised on the basis of the earlier circular could survive after that circular had been withdrawn, and whether the adjudication order founded on such circular was liable to be quashed.

Analysis: The demand originated from the departmental circular issued in November 2001. The Court noted that the circular had subsequently been withdrawn by the department through Circular No. 870/08/2008-CX dated 16.05.2008, and the very source on which the demand rested had ceased to operate. In these circumstances, the adjudication order based on the withdrawn circular could not be sustained.

Conclusion: The demand was unsustainable and the adjudication order was liable to be quashed.

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