Refund claim required before adjustment of excess excise duty; invoice-specific demand failed and penalty fell with it.

Excess central excise duty allegedly paid because the assessable value was inflated could not be adjusted as of right without first pursuing a refund claim under Section 11B of the Central Excise Act, 1944; that aspect was upheld. On the last invoice, the demand failed because the invoice related to clearance of the basic machinery, not the spare parts on which differential duty had been computed, so the duty demand on that invoice was deleted. Since the underlying demand did not survive to that extent, the penalty was also set aside. The remaining differential duty was sustained.

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Issues: (i) Whether the assessee could seek adjustment of excess duty paid on the basis of an inflated assessable value without first filing a refund claim; and (ii) whether differential duty was payable on the last invoice and whether penalty was warranted.

Issue (i): Whether the assessee could seek adjustment of excess duty paid on the basis of an inflated assessable value without first filing a refund claim.

Analysis: The claim proceeded on the footing that the assessable value had been wrongly inflated because erection and commissioning charges and third-party inspection charges had been included. The proper course, however, was to seek refund of duty paid in excess under Section 11B of the Central Excise Act, 1944. In the absence of any refund claim, adjustment of the alleged excess could not be claimed as of right.

Conclusion: The assessee was not entitled to adjustment without first pursuing a refund claim, and the order on this aspect was upheld.

Issue (ii): Whether differential duty was payable on the last invoice and whether penalty was warranted.

Analysis: On scrutiny of the invoice dated 30-9-1996, it related to clearance of the basic machinery and not the spare parts on which the differential duty had been worked out. In that view, the duty demanded on that invoice was not sustainable. As the demand to that extent failed, the imposition of penalty also did not survive.

Conclusion: The differential duty relatable to the last invoice was deleted and the penalty was set aside.

Final Conclusion: The appeal succeeded only to the extent of deleting the demand arising from the last invoice and removing the penalty, while the remaining differential duty was sustained.

Ratio Decidendi: Excess duty allegedly paid due to an inflated assessable value cannot be adjusted in the absence of a refund claim under the applicable refund provision, and penalty cannot survive where the underlying demand is found unsustainable on examination of the invoice.

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