Area-based exemption breach bars re-credit where clandestine removal and final findings of suppression make later duty payment ineffective.

An assessee availing an area-based exemption cannot claim re-credit of duty paid later on goods clandestinely removed in breach of the notification conditions. Where the goods were cleared by misdeclaration as waste coal and the clearance amounted to suppression and fraud, the subsequent payment of duty did not cure the original violation or restore eligibility for re-credit. Because the earlier findings on suppression had attained finality, they could not be reopened in the later proceeding, and re-credit remained inadmissible.

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Issues: Whether re-credit of duty paid on goods clandestinely removed was admissible to an assessee availing the area-based exemption under Notification No. 39/2001-CE.

Analysis: The clearance of goods was found to be under misdeclaration as waste coal and, therefore, a clandestine removal in contravention of the conditions of the exemption notification. The duty was paid only subsequently, after the wrongful clearance. Since the earlier demand proceedings had already attained finality on the finding of suppression of facts and fraud, the assessee could not dispute those findings in the present proceeding. On these facts, the conditions of the notification stood violated and the subsequent payment did not restore eligibility to take re-credit of the duty amount.

Conclusion: Re-credit was held to be inadmissible and the demand was sustained in favour of the Revenue.

Ratio Decidendi: An assessee who clandestinely clears goods in breach of the conditions of an area-based exemption notification cannot claim re-credit of duty paid later on such clearances, especially where the foundational finding of suppression or fraud has attained finality.

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