2018 (11) TMI 215 - AT - Central Excise

Refund of the duty paid on aluminium products including aluminium dross - Area Based exemption availed - It was viewed by Revenue that since no duty was payable at the time of clearance of aluminium dross, no refund will also be payable in terms of area based exemption notification. Held that - The intention of the Government in coming out with the area based exemption notification is to promote industrialization of the area. The Notification grants exemption to the specified goods manufactured within the designated area ; but such exemption has been operational through the refund mechanism. The CBEC Circular No.682/73/2002-CX dated 19.12.2002 has clarified that the refund paid under the area based exemption notification, is not the result of any excess payment of duty attracting Section 11B of the Act, but is a way of operation of the benefit of area based exemption. The appellant cannot be defaulted for making payment of duty on aluminium dross, especially since the appellant has been availing benefit of the same Notification for a long time and has been receiving periodical refunds - the appellant was not required to pay duty on aluminium dross in the light of the pronouncement of law by the Apex Court. But keeping in view the purpose of Notification, it can be inferred that once duty is paid, the refund cannot be denied to them. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Challenge to Order-in-Appeal regarding refund of duty paid on aluminium dross under area-based exemption notification.

Analysis:
The appellant, engaged in manufacturing aluminium products, faced a dispute regarding the refund of duty paid on aluminium dross generated during the manufacturing process. The appellant cleared goods, including aluminium dross, on payment of Central Excise duty under an area-based exemption Notification. The Revenue sought to recover the refunded amount, claiming that aluminium dross was not exigible to excise duty. The original authority and Commissioner upheld the recovery decision, leading to the appeal before the Tribunal.

The appellant argued that the refund orders had attained finality and could not be re-opened under Section 11A for erroneous refund without a review under Section 35E. The appellant relied on relevant case laws to support their position. On the other hand, the Revenue contended that a notice under Section 11A could be issued without a review under Section 35E, citing Supreme Court decisions.

The Tribunal noted that the appellant's unit was covered by the area-based exemption Notification, requiring duty payment on manufactured goods for refund eligibility. The Tribunal highlighted that aluminium dross, though covered under Chapter 26, was held non-excisable by the Supreme Court. Despite this, the Tribunal opined that the appellant, having paid duty on aluminium dross while availing benefits under the Notification, should not be denied the refund.

Considering the purpose of the Notification to promote industrialization, the Tribunal concluded that the appellant should not have paid duty on aluminium dross based on the Supreme Court ruling. However, in line with the Notification's intent, the Tribunal allowed the appeal, setting aside the impugned order and granting consequential relief to the appellant.