2014 (10) TMI 406 - AT - Central Excise

Denial of refund claim - Commissioner (Appeals) has rejected the refund claim by upholding the order of adjudicating authority on the ground that said deposit cannot be held to be pre-deposit inasmuch as the same was adjusted against sanctioned refund claim - Held that - When it is the department itself, who adjusted the sanctioned refund claim against the penalty amount, due to be paid by the assessee, it has to be treated as pre-deposit, which are subject to outcome of final order of the appellate authority. Revenue cannot take the benefit of its own actions i.e. first adjusting the outstanding dues against the sanctioned claims and then to say that same were not pre-deposits - As regards the reliance on provisions of Section 11B(ec), it is seen that same was introduced with effect from 11-5-2007, as such, would not be applicable to the refunds arising out of the order dated 17-2-2006. In any case, I find that the same does not apply to the refund of penalty as held by the Tribunal in the case of CCE, Mumbai v. Fibre Foils Ltd. 2000 (7) TMI 437 - CEGAT, MUMBAI laying down that in any case the limitation provided in terms of Section 11B applies to refund of duty and not refund of penalty - Decided in favour of assessee.

Summary

Issues:
1. Denial of Cenvat credit and imposition of penalty.
2. Rejection of refund claim based on time-bar under Section 11B(ec).

Analysis:

Issue 1: Denial of Cenvat credit and imposition of penalty
The appeal involved a proceeding against the appellant for the denial of Cenvat credit, resulting in the confirmation of the denial along with the imposition of a penalty of Rs. 5 lakh. The Commissioner (Appeals) reduced the penalty to Rs. 3 lakh. Subsequently, certain rebates were sanctioned to the appellant, and the penalty of Rs. 5 lakh imposed by the adjudicating authority was adjusted against the rebates. With the reduction in penalty to Rs. 3 lakh, the appellant became entitled to a refund of Rs. 2 lakh. The refund claim was filed accordingly.

Issue 2: Rejection of refund claim based on time-bar under Section 11B(ec)
The Commissioner (Appeals) rejected the refund claim, upholding the adjudicating authority's decision that the deposit cannot be considered a pre-deposit since it was adjusted against the sanctioned refund claim. The Commissioner also cited Section 11B(ec), stating that refund claims arising from appellate authority orders must be filed within one year from the relevant date, which is the date of the order. Consequently, the refund claim was rejected on the grounds of being time-barred.

Analysis of the Judgment
The Tribunal disagreed with the Commissioner's reasoning, stating that the department's adjustment of the sanctioned refund claim against the penalty amount should be treated as a pre-deposit, subject to the final order of the appellate authority. It was emphasized that the revenue cannot benefit from its actions by first adjusting outstanding dues against sanctioned claims and then claiming they were not pre-deposits. Regarding Section 11B(ec), it was noted that this provision was introduced after the relevant order date and does not apply to refunds arising from orders predating its enactment. Additionally, the Tribunal clarified that Section 11B applies to the refund of duty, not penalties, citing a previous case to support this distinction. Consequently, the Tribunal set aside the impugned order, allowing the appeal and granting consequential relief to the appellants.