2014 (3) TMI 51 - AT - Central Excise

Refund - payment of excess duty - Compounded Levy Scheme - wrong determination of Annual Production Capacity - independent textile processors - whether respondent could file a refund claim of excess duty paid when Annual Production Capacity fixed by the Revenue under Hot Air Stenter Independent Processors Annual Capacity Determination Rules 1998, has not been challenged - Held that - If the determination was not appealable, in our view, it would be incorrect to hold that without challenging such an order, the manufacturer cannot claim refund of duty erroneously collected. The fact that the galleries were included while determining the Annual Production Capacity and as such, the galleries were otherwise not required to be included by virtue of the decisions of the Tribunal and the Apex Court, there is no dispute. In our view, therefore, the petitioners were justified in filing refund claims in terms of Section 11B of the Central Excise Act claiming refund of excess duty collected on the basis of such consideration of galleries in determining Annual Production Capacity and collecting corresponding excise duty on such capacity. In the show cause notice, three objections were raised. The refund claims were declined only on one ground, namely, that without challenging the determination of annual capacity of production, the processor could not have sustained refund claim. In that view of the matter, the Deputy Commissioner did not go into other aspects. Therefore, even while setting aside the orders passed by the Tribunal and the central excise authorities and holding that the refund claims were maintainable without challenging the determination of Annual Production Capacity, we would still like to remand the proceedings to the Deputy Commissioner for further consideration and adjudication on other two issues raised in the show cause notice. - matter remanded back to original authority - Decided in favor of assessee.

Summary

Issues:
1. Refund claim of excess duty paid when Annual Production Capacity fixed by Revenue is not challenged.

Analysis:
The appeal was filed by the Revenue against an order remanding the case to the original adjudicating authority based on a Bombay High Court ruling. The respondent argued that the issue was decided in their favor. The respondent did not appear on multiple hearing dates. The jurisdictional High Court also decided a similar issue in another case. The main issue was whether a refund claim could be filed when the Annual Production Capacity fixed by the Revenue was not challenged. The Gujarat High Court's judgment highlighted the rules regarding the determination of annual capacity and the lack of appeal provisions in such cases. The court emphasized that the determination of Annual Production Capacity is an administrative exercise, not a judicial or quasi-judicial order. The court held that not challenging the capacity determination does not prevent a manufacturer from claiming a refund of erroneously collected duty.

The court differentiated this case from previous rulings where refund claims were denied for not challenging appealable orders. The court set aside the orders rejecting refund claims and remanded the case for further consideration on other issues raised in the show cause notice. The court directed the Deputy Commissioner to reevaluate the refund claims expeditiously within six months. Ultimately, the appeal by the Revenue was rejected, and the cross objection by the respondent was allowed.