2015 (6) TMI 1056 - AT - Central Excise

Eligibility of refund - recovery proceedings - Held that - The admitted fact is that the Original Authority found that the refund is correctly eligible to the appellant. However, he appropriated the amount against the confirmed demands without due notice for recovery to the appellant. It is a fact that all the confirmed demands were taken up on appeal and were pending with higher appellate Forum with a request for stay of recovery. Before any decision was taken on such stay/appeal coercive action of recovery of such due was taken by the original authority. The appellant was not put to notice. On such coercive recovery Tribunal in Anna Petrochem Pvt. Ltd. (2009 (5) TMI 716 - CESTAT, NEW DELHI) and Jay Kay Synthetics (2001 (9) TMI 208 - CEGAT, NEW DELHI ) held that show cause notice/personal hearing is required before such appropriation. In Voltas Ltd. 2006 (5) TMI 232 - CESTAT, BANGALORE , the Tribunal examined the scope and applicability of Section 11. It was held that sums due to Government become arrears only after finality is reached on such demand. The Appellate Authority also confirmed such appropriation without examining the legality of action of recovery proceedings. However, as shown now by the appellant, none of the confirmed demands survive as on date. This being not disputed by Revenue also. In any case, in view of non-existence of any confirmed demand as on date, the appellant is rightly eligible for full payment of refund as originally sanctioned by the jurisdictional Asstt. Commissioner with applicable interest. - Decided in favour of assessee.

Summary

Issues involved:
Appropriation of refund against confirmed demands without notice, legality of action of recovery proceedings, applicability of Section 11, eligibility for full payment of refund.

Analysis:

1. Appropriation of refund against confirmed demands without notice: The appellant filed a claim for refund, which was sanctioned by the Original Authority. However, the Original Authority appropriated the refund amount against confirmed demands without providing any notice to the appellant. The Tribunal held that coercive recovery without notice is impermissible, citing precedents like Anna Petrochem Pvt. Ltd. and Jay Kay Synthetics. It was emphasized that a show cause notice and personal hearing are essential before such appropriation takes place. The Tribunal found the lack of notice to be a procedural irregularity.

2. Legality of action of recovery proceedings: The Tribunal examined the legality of the recovery proceedings and highlighted that the sums due to the government become arrears only after finality is reached on the demand. The Appellate Authority confirmed the appropriation without scrutinizing the legality of the recovery actions. However, the appellant demonstrated that none of the confirmed demands were existing at the time of the appeal, a fact undisputed by the Revenue. This raised questions about the legality of the original appropriation in light of the changed circumstances.

3. Applicability of Section 11: Referring to the case of Voltas Ltd., the Tribunal discussed the scope and applicability of Section 11 in the context of dues to the government. It was established that amounts become arrears only upon finality of the demand. The Tribunal's analysis underscored the importance of resolving demands conclusively before resorting to coercive actions like appropriation.

4. Eligibility for full payment of refund: Considering the non-existence of any confirmed demand against the appellant at the time of the appeal, the Tribunal concluded that the appellant was entitled to the full refund amount as initially sanctioned by the jurisdictional Asstt. Commissioner. The Tribunal set aside the impugned order upholding the appropriation and allowed the appeal, granting consequential relief to the appellant. This decision was based on the factual analysis and the legal principles discussed during the proceedings.

In conclusion, the judgment by the Appellate Tribunal CESTAT NEW DELHI addressed various legal issues surrounding the appropriation of a refund against confirmed demands without notice, the legality of recovery proceedings, the interpretation of Section 11, and the entitlement to full payment of refund. The decision provided clarity on the procedural requirements, the timing of arrears, and the rights of the appellant in such circumstances, ultimately ruling in favor of the appellant and setting aside the appropriation order.