Unilateral appropriation of bank guarantee against unquantified liability held impermissible, with refund sustained despite later appeal withdrawal.

A bank guarantee furnished against an unquantified liability arising from confiscation and redemption fine cannot be appropriated unilaterally by the Department before the adjudication order quantifies the liability. Such appropriation was treated as contrary to the basic requirement of adjudication, and the later withdrawal of the earlier appeal after settlement under the Kar Vivad Samadhan Scheme did not validate the appropriation or defeat refund, because the claim concerned an amount taken without lawful quantification. Refund was therefore sustained despite the prior withdrawal of appeal.

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Issues: Whether the Department could unilaterally appropriate the bank guarantee furnished at the time of provisional release when the redemption fine had not been quantified, and whether withdrawal of the earlier appeal after settlement under the Kar Vivad Samadhan Scheme prevented refund of the appropriated amount.

Analysis: The bank guarantee was furnished against an unquantified liability arising from confiscation and redemption fine. In the absence of quantification, the assessee was not in a position to seek settlement in respect of the entire liability under the scheme. The unilateral appropriation of the guarantee by the Department, without a quantified amount being determined in the adjudication order, was held to be contrary to the basic tenet of adjudication. The earlier withdrawal of the appeal after settlement did not alter the position, because the refund claim related to an amount appropriated without lawful quantification and the entire order-in-original had been covered by the settlement proceedings.

Conclusion: The appropriation of the bank guarantee was unlawful, and refund was rightly directed despite withdrawal of the earlier appeal.

Final Conclusion: The Revenue's challenge failed, and the refund order in favour of the assessee was sustained.

Ratio Decidendi: A bank guarantee furnished against an unquantified liability cannot be appropriated unilaterally by the Department, and such appropriation is not validated merely because an appeal against the original order was later withdrawn after settlement proceedings.

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