Actual expense deductions and penalty relief follow binding remand directions when prior penalty provisions no longer apply.

A remand direction requiring deductions for sales tax, freight and octroi to be allowed on actual expenses had attained finality, and the adjudicating authority could not restrict the allowance to the lower of the provisional claim and the actual amount. The demand based on refusal to grant deduction on the actual basis was therefore set aside. Penalty also could not survive because the earlier adjudication had already dropped the charge under Rule 173Q and held Section 11AC inapplicable for the period involved. In the absence of any surviving penalty basis, the fresh penalty was unsustainable and was set aside, with the matter remanded for fresh decision in accordance with the earlier directions.

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Issues: (i) whether deductions claimed on account of expenses such as sales tax, freight and octroi were required to be allowed on the actual basis while finalising the provisional assessment; (ii) whether penalty could be sustained under the cited penal provisions after the earlier order had dropped the charge under one provision and had held the other penalty provision inapplicable.

Issue (i): whether deductions claimed on account of expenses such as sales tax, freight and octroi were required to be allowed on the actual basis while finalising the provisional assessment.

Analysis: The earlier remand order had specifically directed the adjudicating authority to allow the deductions on the basis of actual expenses. That direction had attained finality and was not followed in the fresh adjudication. The lower authority, instead of working out the actual figures, restricted the allowance to the lower of the provisional claim and the actual amount, which was contrary to the earlier direction.

Conclusion: The demand founded on refusal to grant deduction on the actual basis was not sustainable and was set aside in favour of the assessee.

Issue (ii): whether penalty could be sustained under the cited penal provisions after the earlier order had dropped the charge under one provision and had held the other penalty provision inapplicable.

Analysis: The earlier adjudication had already dropped the charge under Rule 173Q of the Central Excise Rules, 1944, while the Tribunal had held that penalty under Section 11AC of the Central Excise Act, 1944 could not be imposed for the period involved. In the absence of any surviving basis for penalty, the fresh imposition was inconsistent with the earlier binding directions.

Conclusion: The penalty could not be sustained and was set aside in favour of the assessee.

Final Conclusion: The matter was allowed to the extent that the demand and penalty were not sustained, and the case was remanded for fresh decision in accordance with the earlier directions.

Ratio Decidendi: A lower authority must comply with an earlier remand direction on assessment finalisation, and a penalty cannot be sustained where the governing penalty provision is inapplicable and the alternative charge has already been dropped.

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