2023 (1) TMI 1298 - AT - Central Excise

Recovery of Erroneous Refund - Fraudulently availing excess refund under the N/N. 56/2002 by over-valuing the goods cleared - HELD THAT - On going through the provisions of the Notification, it is clear that the refund of duty as per the said Notification is different from refund of duty envisaged in Section 11B - the provisions of Section 11A, as far as recovery of erroneous refund is concerned, have no applicability to the refunds under the impugned notification. The issue is no longer res integra. The jurisdictional High Court of J K has gone into the very same issue in the case of COMMISSIONER OF CENTRAL GST AND CENTRAL EXCISE VERSUS KRISHI RASAYAN EXPORTS PVT. LTD. 2023 (7) TMI 661 - JAMMU AND KASHMIR AND LADAKH HIGH COURT and decided the matter in favour of the appellants holding that the refund sanctioned by the adjudicating authority in favour of the respondent was after proper application of mind and by passing of speaking orders and therefore, cannot be termed as 'erroneous refund' for the purposes of section 11A of the Act. Penalty - HELD THAT - When the impugned order is not maintainable on merits, the question of penalty on the company or Shri Dinesh Garg would not arise. The impugned order is not legally sustainable and is liable to be set aside - Appeal allowed.

Summary

Issues Involved:
1. Applicability of Section 11A for recovery of "erroneous refund".
2. Validity of the refund sanctioned under Notification No. 56/2002.
3. Allegations of fraud, collusion, or willful misstatement by the appellants.
4. Imposition of penalty on the company and Shri Dinesh Garg.

Summary of Judgment:

1. Applicability of Section 11A for Recovery of "Erroneous Refund":
The appellants argued that Section 11A, which deals with the recovery of duty "erroneously refunded," is not applicable to refunds under Notification No. 56/2002. They cited a Board Circular dated 19.12.2002, which clarified that the refunds under this notification are not due to excess payment of excise duty but are a mechanism to operationalize the exemption. Therefore, the provisions of Section 11A concerning "erroneous refund" do not apply.

2. Validity of the Refund Sanctioned under Notification No. 56/2002:
The refund was duly sanctioned by the Departmental officers in terms of Notification No. 56/2002, and such orders are appealable under Section 35 of the Central Excise Act, 1944. The appellants contended that the refund orders had been accepted by the Department after due application of mind and thus could not be termed "erroneous." They relied on various case laws, including Krishi Rasayan Exports Pvt. Ltd. and others, to support their argument.

3. Allegations of Fraud, Collusion, or Willful Misstatement:
The Tribunal found no material evidence to suggest that the appellants had suppressed any material facts or made any willful misstatement to evade payment of duty. The High Court of J&K in Krishi Rasayan Exports Pvt. Ltd. had previously ruled that the extended period of limitation under Section 11A could not be invoked in the absence of fraud, collusion, or willful misstatement. The Tribunal concurred with this view, noting that the refunds were sanctioned after a transparent process and periodic audits.

4. Imposition of Penalty on the Company and Shri Dinesh Garg:
Since the impugned order was found to be legally unsustainable on merits, the question of imposing penalties on the company or Shri Dinesh Garg did not arise. The Tribunal set aside the penalties.

Conclusion:
The Tribunal concluded that the impugned order was not legally sustainable and set it aside. Both appeals were allowed, and the penalties were dismissed. The judgment was pronounced on 11/10/2023.