2020 (1) TMI 1451 - AT - Central Excise

Recovery of erroneous refund - Area Based Exemption - benefit of N/N. 32/99-CE dated 08.07.1999 as applicable to specific areas in the State of Meghalaya - provision of review as contained in Section 35E (2) of the Central Excise Act, 1944 - applicability of the provisions of Section 11A to recover amount refunded - HELD THAT - A plain reading gives a clear understanding that it not only provides for the recovery of duties not paid/ not levied or short paid/short levied but also provides for recovery of duty erroneously refunded irrespective of the fact whether or not the refund is on account of any assessment. Alternatively, any order under any provision of this Act or the Rules made thereunder amounts to assessment if such a decision concerns the levy of duty. It is to be seen that basically the exemption provided by the Notification No 32/99 is operationalised by way of granting refund of the duty paid by the units which claimed the exemption contained therein. It cannot be said that the refund did not arise from an order of assessment - Understandably, the amount is to be paid from the credit of duties availed by the manufacturer, on the inputs and capital goods used by him. Once the amount is refunded in terms of Notification 32/99, it acquires the nature of duty and therefore, the provisions of Section 11A are attracted - the Revenue has correctly invoked the provisions of Section 11A to recover the amount or duty erroneously refunded in the instant case. Ongoing through the provisions of the Notification No.32/99-CE dated 08.07.1999, it is abundantly clear that the scheme of the Notification is available to the manufacturer in the specified area mentioned therein in the Notification - the exemption contained therein, though made operational through a refund mechanism, shall be applicable to the goods manufactured by the units and not to goods procured and later cleared by the manufacturer. Cenvat Credit has been allowed to manufacturers to reduce the cascading effect of taxation and as such manufacturers were allowed to avail the credit of duties paid on inputs and Capital goods. A provision has been made in the Cenvat Rules to allow the manufacturers to remove the inputs and Capital Goods as such or after use by debiting the credit availed by them or by paying an amount attributable to the credit availed in the cases they have no sufficient balance of credit. These Rules are made to operationalise the credit mechanism. The Superintendent has clarified only to the extent that the appellant is required to first utilize the Cenvat credit available and the balance be paid through PLA when capital goods are removed. It is found that the clarification by the Superintendent, does not in any manner confer any right to the appellant to make a claim of refund of duty paid in terms of Notification No.32/99-CE dated 08.07.1999 - The learned Counsel for the appellant further, seeks to rely on the CBEC Circular dated 9 July 1999. On going through the provisions of the said Circular, we find that the said Circular was issued to operationalise the notification and as such cannot come to the rescue of the appellant. The Department has correctly invoked the provisions of Section 11A to recover the amount refunded erroneously - Appeal dismissed.

Summary

Issues:
1. Applicability of Section 11A to recover erroneously refunded amount.
2. Interpretation of Notification No.32/99-CE regarding exemption applicability to goods procured and cleared by the manufacturer.

Analysis:

Issue 1: Applicability of Section 11A
The appellant claimed a refund under Notification No.32/99-CE for removing Sub-merged Arc Furnace after using it in the factory. The Revenue issued a show-cause notice to recover the refund, invoking Section 11A of the Central Excise Act, 1944. The appellant argued that Section 11A was not applicable as the refund was related to area-based exemption, not an assessment order. However, the Tribunal found that Section 11A allows recovery of erroneously refunded duty, irrespective of the assessment, and the refund under the Notification was akin to duty payment followed by a refund claim. Therefore, the Revenue correctly utilized Section 11A to recover the amount erroneously refunded.

Issue 2: Interpretation of Notification No.32/99-CE
The Notification provides an exemption for goods produced by a manufacturer in specified areas subject to conditions. The Tribunal clarified that the exemption applies to goods manufactured by the units and not to goods procured and cleared later. The intention was to incentivize production in specified areas, not trading activities. The Tribunal emphasized that the exemption was operationalized through a refund mechanism and should not be extended to goods procured and cleared by the manufacturer. The appellant's reliance on clarifications and circulars was deemed insufficient to support their claim for refund under the Notification. Therefore, the Tribunal held that the exemption claimed by the appellant did not apply to goods procured and cleared by them.

In conclusion, the Tribunal dismissed the appeal, stating that the Department correctly invoked Section 11A to recover the erroneously refunded amount. The Tribunal emphasized that the exemption under Notification No.32/99-CE was intended for goods manufactured in specified areas, not for goods procured and cleared by the manufacturer. The appellant's arguments based on legal precedents and clarifications were deemed insufficient to support their claim for refund.