Withdrawn circular cannot sustain refund rejection where coconut oil classification dispute was settled in favour of the assessee.

Refund claims arising from the classification of coconut oil packed in containers below 200 ml could not be rejected on the strength of a circular that had later been withdrawn. The lower authority's reasoning lost its basis once the circular ceased to operate, and the record also showed that the classification dispute had been decided in favour of the assessee by higher fora. The deposits made during investigation did not, by themselves, bar refund relief. The rejection of the refund claims was therefore unsustainable, and consequential refund relief followed.

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Issues: Whether rejection of the appellant's refund claims was sustainable when the dispute arose from classification of coconut oil packed in containers below 200 ml and the circular relied upon by the lower authority had been withdrawn.

Analysis: The refund claims arose out of a long-standing classification dispute on coconut oil packed in small containers. The record showed that the appellant had made deposits equivalent to duty during the pendency of investigation and the related classification controversy had been considered by higher judicial fora in favour of the assessee. The lower appellate authority had relied substantially on a circular that was later withdrawn, and once the foundation for the rejection ceased to exist, the rejection could not be sustained. In these circumstances, the deposits could not be treated as a bar to refund merely on the basis of the withdrawn circular.

Conclusion: The rejection of the refund claims was unsustainable and the appeals were entitled to succeed.

Ratio Decidendi: Where a refund rejection is founded primarily on a circular that is later withdrawn, and the underlying classification controversy has been resolved in favour of the assessee, the rejection cannot be sustained and consequential refund relief must follow.

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