Mandatory abatement under duty rules bars recovery of adjusted amounts and defeats demand and penalty for short payment.

Where abatement is mandatorily available under the Pan Masala Packing Machine (Capacity Determination and Collection of Duty) Rules, 2008, the revenue cannot insist on recovery of the amount adjusted on that account for a part-month operation. The Tribunal noted that the assessee had paid duty for the relevant month after operating the machines only part of the month, and had adjusted the abatement permitted by the Rules. As no material showed that the earlier precedent supporting this view had been overruled, the appellate order setting aside the confirmed demand and penalty was upheld. The demand for alleged short payment and the penalty were therefore unsustainable.

---

---

Issues: Whether the revenue could insist on recovery of the amount adjusted towards abatement under the Pan Masala Packing Machine (Capacity Determination and Collection of Duty) Rules, 2008 and sustain the demand and penalty for alleged short payment of duty.

Analysis: The respondent had paid duty for the relevant month after operating the machines for only part of the month and had adjusted the amount of abatement contemplated under the Rules. The impugned order of the Commissioner (Appeals) followed an earlier Tribunal decision which had taken the view that, where abatement is mandatorily required to be granted, the revenue cannot insist on recovery of the amount so adjusted. No material was shown to demonstrate that the precedent relied upon had been overturned by a higher forum. The Tribunal, therefore, found no infirmity in the appellate order setting aside the confirmed demand and penalty.

Conclusion: The demand and penalty were not sustainable, and the revenue appeal failed.

---