Revenue neutrality under exemption notification justified rectification where duty-paid clearances were also eligible for exemption or refund.

CESTAT Mumbai held that rectification was warranted because the earlier order had proceeded on an incorrect assumption about exemption eligibility under Notification No. 3/2001-C.E. Goods cleared on payment of duty within the first 3500 MT were also eligible for the notification, so the duty paid and the corresponding right to exemption or refund made the matter revenue neutral. The prior distinction rejecting revenue neutrality could not therefore be sustained, and the revenue appeals were dismissed.

---

---

Issues: Whether the applicants were entitled to rectification of the earlier order on the ground that the duty paid clearances within the first 3500 MT were themselves eligible for exemption under Notification No. 3/2001-C.E. dated 01.03.2001, making the demand revenue neutral.

Analysis: The Tribunal noted that the earlier order had distinguished the prior decision on the assumption that the clearances on payment of duty within the first 3500 MT were not otherwise eligible for exemption. On examination of the order-in-original, the Tribunal found that the goods cleared on payment of duty within that limit were also eligible for the notification. In that situation, the duty payment and the corresponding entitlement to exemption/refund created a revenue neutral situation, and the distinction earlier drawn could not be sustained.

Conclusion: The rectification was warranted, and the earlier reasoning rejecting revenue neutrality was replaced; the revenue appeals were dismissed.

Final Conclusion: The order was corrected to reflect that the dispute was revenue neutral, resulting in dismissal of the revenue appeals.

Ratio Decidendi: Where duty paid on clearances is offset by an immediate entitlement to exemption or refund on the same goods within the prescribed limit, the demand is not sustainable on the ground of revenue neutrality.

---