2010 (12) TMI 1156 - HC - Central Excise

Refund claim - Although the Tribunal has rejected the claim for refund, it appears that in compliance of the order passed by the Commissioner (Appeals) the refund was granted and thereafter proceedings were initiated for recovering the amount paid by way of refund - whether the order of the Tribunal deserves to be stayed during the pendency of the appeal? - Held that - If the order impugned in the appeal is not stayed, then the petitioners would be required to return the amount already refunded to them. In that event, the cenvat credit deleted on account of refund granted, would have to be restored and the Appellants would be entitled to utilize the said credit on paying excise duty on domestic clearances, even during the pendency of the Appeal. Thus, it is a case of revenue neutral - it would be just and proper to stay the operation of the impugned order passed by the CESTAT dated 8th July 2010 and hear the Appeal on merits expeditiously - matter on remand.

Summary

Issues:
1. Stay of operation of the order passed by the Customs, Excise and Service Tax Tribunal (CESTAT).
2. Entitlement to refund of cenvat credit on goods supplied to a unit in the Special Economic Zone (SEZ).
3. Interpretation of the term "export" under the Central Excise Act.
4. Challenge of the order passed by the Commissioner (Appeals) in Writ Petition.
5. Consideration of staying the Tribunal's order during the appeal process.

Analysis:
1. The Notice of Motion sought a stay on the operation of the order issued by the Customs, Excise and Service Tax Tribunal (CESTAT) on 8th July 2010. The Appellants had already filed an Appeal against this order, which had been admitted. The primary concern was whether the Appellants should be required to return the refunded amount if the Tribunal's order was not stayed during the appeal process, leading to a potential revenue-neutral situation.

2. The core dispute revolved around the entitlement of the Appellants to a refund of cenvat credit claimed on goods manufactured and supplied to a unit in the Special Economic Zone (SEZ). The absence of a clear definition of the term "export" under the Central Excise Act raised the question of whether the Tribunal was justified in applying the definition of "export" under the Customs Act.

3. Despite the Tribunal's rejection of the refund claim, the refund had been granted in compliance with the order from the Commissioner (Appeals). Subsequently, actions were taken to recover the refunded amount, leading to a challenge in Writ Petition No. 9075 of 2010 (Civil). This challenge was based on the proceedings initiated to recover the refunded sum.

4. The critical issue to be determined in the Notice of Motion was whether the Tribunal's order should be stayed pending the appeal process. If the order was not stayed, the Appellants would have to return the refunded amount. This, in turn, would necessitate the restoration of the cenvat credit that had been deleted due to the refund. Allowing the stay would enable the Appellants to utilize the credit for paying excise duty on domestic clearances, maintaining a revenue-neutral position.

5. In light of the circumstances, the Court deemed it just and proper to stay the operation of the Tribunal's order dated 8th July 2010 and proceed with the Appeal promptly. The Notice of Motion was granted, and the Central Excise Appeal No. 140 of 2010 was scheduled for a hearing on 19th January 2011, alongside Writ Petition No. 9075 of 2010 (Civil). This decision aimed to ensure a fair and expeditious consideration of the Appeal on its merits.