Duty adjustment against short payment within the same financial year can eliminate any net demand under the SSI regime.

Excess duty paid in one clearance period may be adjusted against short payment in another period within the same financial year where the liability is being worked out under the same SSI regime. The Tribunal applied the principle that excess and deficiency must be netted off before any demand is raised, and that duty paid by the assessee can be adjusted against duty assessed by the proper officer. As the adjustment removed any net shortfall, no recoverable duty demand survived and the impugned orders were set aside.

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Issues: Whether excess duty paid in one period could be adjusted against short payment made in another period within the same financial year, so that no duty demand survived.

Analysis: The controversy was confined to whether the assessee, having paid duty in excess on some clearances and short-paid on others under the same SSI regime, was entitled to set off the excess against the short payment instead of being compelled to seek refund and face separate demand proceedings. The Tribunal relied on the principle that duty determined and paid by the assessee can be adjusted against the duty assessed by the proper officer, and that excess and deficiency must be worked out together before raising any demand for the balance, if any. It followed earlier decisions recognising adjustment of duty paid in one stream of clearance against duty payable in another, including the position that where the adjustment eliminates any net shortfall, no recoverable demand remains.

Conclusion: The assessee was entitled to adjustment of excess duty against short payment, and since no net demand survived after such adjustment, the impugned orders were not sustainable and were set aside.

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