Acho que inserir a expressão case original no local correto deve funcionar. Tente isto:
PROCEDURE [dbo].[CreateLandingPurchaseOrderDetails]
-- Add the parameters for the stored procedure here
@startDate DATE, @endDate DATE
AS
BEGIN
-- SET NOCOUNT ON added to prevent extra result sets from
-- interfering with SELECT statements.
SET NOCOUNT ON;
-- Insert statements for procedure here
SELECT (
SELECT
Contacts.ContactId AS '@ContactId',
LandingHeaders.VesselOwner AS '@Owner',
FORMAT(SUM(LandingDetails.Quantity * LandingDetails.UnitPrice), 'N2') AS '@Owed',
SocietyMemberships.WeeklyDeductionRate AS '@WeeklyDeductionRate',
SocietyMemberships.FromMinimumReturn AS '@FromMinimumReturn',
Deductions.DeductionRate AS '@DeductionRate',
CASE
WHEN SUM(LandingDetails.Quantity * LandingDetails.UnitPrice) - (SUM(LandingDetails.Quantity * LandingDetails.UnitPrice) * DeductionRate + WeeklyDeductionRate) > FromMinimumReturn
THEN SUM(LandingDetails.Quantity * LandingDetails.UnitPrice) * DeductionRate + WeeklyDeductionRate
ELSE SUM(LandingDetails.Quantity * LandingDetails.UnitPrice) * DeductionRate
END AS '@TotalDeductions',
(SELECT DISTINCT
ld1.ProductId AS '@ProductId',
FORMAT(AVG(ld1.UnitPrice), 'N2') AS '@Cost',
FORMAT(SUM(ld1.Quantity), 'N2') AS '@Quantity'
FROM LandingDetails ld1
INNER JOIN dbo.LandingHeaders lh1
ON ld1.LandingId = lh1.LandingId
WHERE Posted = 0
AND lh1.VesselOwner = LandingHeaders.VesselOwner
GROUP BY ld1.ProductId
FOR XML PATH ('Products'), TYPE)
FROM dbo.LandingDetails
INNER JOIN dbo.LandingHeaders
ON LandingDetails.LandingId = LandingHeaders.LandingId
INNER JOIN dbo.Vessels
ON LandingHeaders.VesselId = Vessels.VesselId
INNER JOIN dbo.Contacts
ON Vessels.OwnerId = Contacts.ContactId
INNER JOIN dbo.SocietyMemberships
ON Contacts.SocietyId = SocietyMemberships.SocietyId
INNER JOIN dbo.Deductions
ON Vessels.DeductionId = Deductions.DeductionId
WHERE LandingHeaders.Posted = 0
AND LandingDate1 BETWEEN @startDate AND @endDate
GROUP BY ContactId,
LandingHeaders.VesselOwner,
SocietyMemberships.WeeklyDeductionRate,
SocietyMemberships.FromMinimumReturn,
Deductions.DeductionRate
ORDER BY ContactId
FOR XML PATH ('Owner'), TYPE)
FOR XML PATH ('PurchaseOrders'), TYPE
END
A consulta provavelmente pode ser melhorada, mas sem definições de tabela e alguns dados de amostra, é um pouco difícil testá-la.
Confira este SQL Fiddle para uma versão ligeiramente ajustada que deve dar o mesmo resultado.