Retrospective exemption for compound rubber defeated duty levy on captive consumption during the interim period.

Compound rubber captively consumed during 1.3.1994 to 27.3.1994 was held not exigible to duty because the exemption withdrawal for that brief period was later treated by the Apex Court as an inadvertent withdrawal corrected by a subsequent notification with retrospective effect. On that basis, the interim period could not support levy of duty, and once the levy itself failed, the reduced quantified demand also had no legal footing. The department's challenge to the reduction in demand therefore failed.

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Issues: Whether duty was payable on compound rubber captively consumed during the interim period from 1.3.1994 to 27.3.1994, and whether the reduced duty demand could be sustained.

Analysis: The exemption earlier available to compound rubber was withdrawn for a short period, but the subsequent notification restoring the exemption was treated by the Apex Court as a correction of an inadvertent withdrawal and as having retrospective effect. In view of that binding position, the interim period could not be treated as one in which compound rubber was exigible to duty. Once the levy itself was negated, no basis remained for sustaining the quantified demand.

Conclusion: The duty demand on compound rubber for the interim period was unsustainable, and the department's challenge to the reduction in demand failed.

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