Revenue-neutral duty payment within the same assessee defeats demand and protects refund where prior sanction remains unchallenged.

Where two units of the same assessee operated under Notification No. 56/2002-CE, duty paid by one unit was refundable and creditable within the same entity, making the situation revenue neutral. On those facts, an alleged excess duty payment did not create a sustainable demand. The refund already sanctioned had not been challenged by the Revenue, so the denial of refund could not be maintained. The Revenue's appeals therefore failed.

---

---

Issues: Whether the demand and denial of refund were sustainable when the assessee's units operated under Notification No. 56/2002-CE, the duty paid by one unit was refundable and creditable within the same entity, and the refund already sanctioned had not been challenged.

Analysis: The two units belonged to the same assessee and functioned under Notification No. 56/2002-CE. Duty paid in cash by the first unit was refundable under the notification, while the second unit was entitled to take credit of the duty so paid. On these facts, any excess duty payment did not create a recoverable duty liability, since the situation was revenue neutral. The sanctioned refund had also not been challenged by the Revenue, and therefore the proceedings could not be sustained against the assessee.

Conclusion: The demand was not sustainable and the refund could not be denied; the appeals by the Revenue failed.

Ratio Decidendi: Where duty payment and credit operate within the same assessee in a revenue-neutral framework, and the underlying refund sanction remains unchallenged, a demand based on alleged excess duty payment is unsustainable.

---