2016 (6) TMI 924 - HC - Central Excise

Payment of duty excise under wring accounting code - rectification of error - the petitioner made payment of such sum through electronically. However, due to the error of the clerk instead of putting excise code of 0038 of such payment, service code of 0044 was inserted - Assistant Commissioner of Central Excise conveyed to the petitioner that the error in payment cannot be rectified as accounts of the years are closed. - Held that - Whatever be the internal instructions of the department, the amount not due under a head cannot be appropriated leaving the actual dues unpaid. The department cannot appropriate sum towards the head where there was no liability for the petitioner to pay the tax. If the petitioner is now made to pay said sum of ₹ 5,04,700/, that would be double recovery by the Government, which would be wholly unauthorised. The respondents are directed to adjust the petitioner s payment of ₹ 5,04,700/for its excise liability for the month of March 2014 - Decided in favor of assessee.

Summary

Issues:
1. Quashing of communication directing payment error correction.
2. Error in payment allocation under different tax heads.
3. Corrective action by the department post-error.

Issue 1 - Quashing of communication directing payment error correction:
The petitioner sought to quash a communication from the Assistant Commissioner of Central Excise, stating that the error in payment allocation cannot be rectified due to closed accounts. The petitioner had paid excise duty but mistakenly allocated it to service tax liability. Despite notifying the department immediately, no corrective action was taken until a demand for the outstanding amount was made. The court noted that the error was acknowledged by the department as purely accidental, and the petitioner's request for adjustment was reasonable. The court directed the respondents to adjust the payment for excise liability, emphasizing that double recovery by the government would be unauthorized.

Issue 2 - Error in payment allocation under different tax heads:
The petitioner had an excise duty liability for March 2014, which was paid electronically but allocated to service tax due to a clerical error. The petitioner promptly notified the Commissioner of the mistake, but no corrective action was taken. The court emphasized that funds cannot be appropriated under a different tax head if there was no corresponding liability, as it would result in double recovery by the government. The court highlighted the importance of correct allocation to prevent unauthorized financial burdens on the petitioner.

Issue 3 - Corrective action by the department post-error:
Despite the petitioner's timely notification of the payment error and request for adjustment, the department failed to rectify the mistake promptly. The court emphasized that corrections should be made to prevent unjust financial burdens on the petitioner. The court directed the department to adjust the payment for excise liability, ensuring that the petitioner is not subjected to double recovery, which would be unauthorized. The judgment concluded by disposing of the petition in favor of the petitioner, highlighting the importance of accurate payment allocation and timely corrective actions by the department to avoid unjust financial implications.