Retrospective use of later royalty agreements cannot support a presumptive duty demand based on earlier clearances.

A show cause notice based duty demand was found unsustainable where the quantification in Annexure-D used royalty agreements executed after the disputed period and applied those later figures retrospectively to earlier clearances. That method created a presumptive assessable value and a presumptive duty demand, rather than a demand grounded in the actual period under notice. On that basis, the notice was held not sustainable and the appeal was allowed in favour of the assessee.

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Issues: Whether the show cause notice was sustainable when the duty demand was quantified on a presumptive basis by using royalty agreements relating to a later period.

Analysis: The quantification in Annexure-D of the show cause notice was founded on royalty agreements executed after the period covered by the notice and those later figures were applied retrospectively to clearances made during the disputed period. This produced a presumptive assessable value and, in turn, a presumptive duty demand. Since the demand itself rested on such retrospective and speculative computation, the basis of the notice was found unsustainable.

Conclusion: The show cause notice was held not sustainable and the appeal was allowed in favour of the assessee.

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