Set-off under exemption notification may be claimed as cash refund when adjustment is no longer possible after appellate relief.

Where an exemption notification granted set-off of duty paid on inputs used in manufacture, and no exclusive procedure required the benefit to be taken only by adjustment, the benefit could not be denied merely because it was claimed as cash refund after departmental rejection and subsequent appellate recognition of eligibility, especially when the notification had been rescinded and adjustment was no longer possible. The assessee was entitled to the set-off by way of cash refund, and refusal to entertain the refund claim on the ground that no duty had been paid was not sustainable.

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Issues: Whether the benefit of set-off under the exemption notification, when not availed because the claim was rejected at the departmental stage, could subsequently be claimed by way of cash refund.

Analysis: The relevant notification entitled the assessee to set off the duty paid on the input used in the manufacture of the finished products, and the notification did not prescribe any exclusive procedure requiring the benefit to be taken only by adjustment. The claim had earlier been rejected by the Assistant Collector, and the assessee was later held eligible in appeal, but by then the notification had been rescinded, making adjustment impossible. The legal position relied on in the cited decisions was that where an exemption or set-off provision is silent on procedure, the benefit cannot be denied merely because it is sought in the form of cash refund, provided duty-paid input and corresponding finished-product duty are established.

Conclusion: The assessee was entitled to claim the set-off benefit by way of cash refund, and the refusal to entertain the refund claim on the ground that no duty had been paid was not sustainable.

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