Revenue neutrality defeats duty demand on inter-unit clearances where corresponding credit is available to the receiving unit

Duty demand on clearance of unprocessed fabrics to sister units was held unsustainable because the duty paid at clearance would have been available as credit to the receiving unit. The Tribunal applied the revenue neutrality principle, finding that when corresponding input credit offsets the duty burden, the demand does not survive. On that basis, the appeal was allowed.

---

---

Issues: Whether the duty demand on clearance of unprocessed fabrics to sister units was unsustainable on the ground of revenue neutrality.

Analysis: The goods were cleared to sister units and duty paid at the time of clearance would have been available as credit to the receiving unit. In such a situation, the exercise is revenue neutral. The Tribunal followed the principle that where the duty demand would be offset by corresponding credit availability, the demand is not sustainable.

Conclusion: The demand was held unsustainable on the ground of revenue neutrality and the appeal was allowed.

Ratio Decidendi: Where duty paid on inter-unit clearances is available as credit to the receiving unit, the resulting revenue neutrality renders the duty demand unsustainable.

---