2015 (11) TMI 1095 - AT - Central Excise

Refund claim - Reduction in penalty imposed - Certain rebates were sanctioned to the appellant and the penalty of ₹ 5 lakhs imposed upon them by the adjudicating authority was adjusted against the same - 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(5)(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 24-2-2006. 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. - Impugned order is set aside - Decided in favour of assessee.

Summary

Issues Involved:
1. Denial of Cenvat credit resulting in penalty imposition.
2. Refund claim rejection based on time bar.

Analysis:
1. The appeal involved a proceeding against the appellant for denial of Cenvat credit, resulting in a penalty imposition of Rs. 5 lakh, later reduced to Rs. 4 lakh by the Commissioner (Appeals). Subsequently, certain rebates were granted to the appellant, and the penalty of Rs. 5 lakhs was adjusted against the rebate. With the penalty reduction to Rs. 4 lakh, the appellant became eligible for a refund of Rs. 1 lakh, leading to the filing of a refund claim.

2. The Commissioner (Appeals) rejected the refund claim, citing that the deposit could not be considered a pre-deposit since it was adjusted against the sanctioned refund claim. Additionally, the Commissioner held that as per Section 11B, clause (ec), 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.

3. The Tribunal disagreed with the Commissioner's reasoning, emphasizing that when the department itself adjusted the sanctioned refund against the penalty, it should be deemed a pre-deposit pending the final appellate order. The Tribunal noted that the provision of Section 11B(5)(ec) was introduced after the order in question and does not apply to penalty refunds, as clarified in the case of CCE, Mumbai v. Fibre Foils Ltd. The Tribunal ruled that the time limitation under Section 11B applies to duty refunds, not penalty refunds.

4. Consequently, the Tribunal set aside the impugned order and allowed the appeal, providing consequential relief to the appellants.