Captive-consumption duty disputes limit refund to excess payment over the duty lawfully payable.

Where captively consumed diesel engines were treated by the assessee as dutiable, and the dispute arose only because the Revenue pressed Rule 57CC, refund was confined to any amount paid in excess of the duty lawfully payable. The Court accepted that once the Tribunal preferred the assessee's legal position and rejected the Revenue's contrary stand, the refund claim could not extend to the full debit amount. The operative principle is that, in a captive-consumption duty dispute, restitution is limited to the excess payment actually made over the correct duty liability.

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Issues: Whether the Tribunal was justified in holding that, where the assessee itself treated the captively consumed diesel engines as dutiable and the dispute arose only on the Revenue's insistence on Rule 57CC, refund could be confined to any amount paid in excess of the duty actually payable.

Analysis: The captively consumed diesel engines formed part of the assessee's manufacturing activity for centrifugal pump sets. The Court noted that the assessee had itself proceeded on the basis that the engines were dutiable, while the Revenue relied on Rule 57CC of the Central Excise Rules. In that setting, once the Tribunal accepted the assessee's legal stand and rejected the Revenue's contrary stand, the Tribunal was justified in restoring the position to its original footing and limiting refund to the amount, if any, paid over and above the duty that ought to have been discharged.

Conclusion: The issue was decided against the assessee and in favour of the Revenue.

Ratio Decidendi: Where duty has been paid on a captive-consumption basis under a mistaken or disputed understanding of liability, refund is confined to the excess over the duty lawfully payable and not to the entire amount debited.

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