2019 (3) TMI 177 - AT - Central Excise

Suo moto adjustment of sanctioned refund against the demand - appeal against the order is still pending adjudication - Held that - The demand which has got setoff vide the sanctioned refund claim has not yet attained finality. The only provision available with the Department to recover the sums due to the Government is Section 11 of Central Excise Act, 1944. Bare perusal of section 11 makes it clear that only such sum is liable to be recovered in such manner, which is payable by the assessee to the Government - In the present case, since the amount qua which the refund has been adjusted is not finally held as being payable, the demand confirmed been already sub-judiced before the competent authority, to my opinion, Department was not entitled to recover the same. The question of suo moto adjusting the sanctioned refund qua the said demand therefore does not arise. The Commissioner (Appeals) has committed an error while relying upon such direction of the Board, which was technically as well as practically of no relevance at the time of impugned order - the Department was not entitled to suo moto adjust the refund claim - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether Department can suo moto adjust the amount of sanctioned refund claim to another demand against the appellant.

Analysis:
The appellate tribunal heard the appeal against Order-in-Appeal No.129 dated 19.03.2018 to determine if the Department could adjust a sanctioned refund claim against another demand. The Order in Appeal affirmed the Department's right to do so, citing para 6 in defense. The appellant contested this decision, referencing a previous case, M/s. Nirmal Products (Unit-I) vs. CCE, Jaipur. The Department, represented by the D.R., supported the impugned order. The tribunal noted the admitted facts: the appellant's sanctioned refund was adjusted against a pending demand confirmed in an earlier order. The tribunal highlighted Section 11 of the Central Excise Act, 1944, which governs the recovery of sums due to the Government.

The tribunal emphasized that the Department can only recover sums confirmed as payable by the assessee. Since the demand against which the refund was adjusted was still under adjudication, the Department had no authority to recover it. The tribunal rejected the reliance on Board Circular No. 967 dated 01.01.2013, as it was irrelevant due to the mandatory deposit made by the appellant. Relying on the precedent set by Nirmal Products, the tribunal concluded that refunds cannot be adjusted against pending demands, and Section 11 should only apply to finalized demands. Therefore, the Order under challenge was set aside, and the appeal was allowed.

This detailed analysis of the judgment clarifies the legal principles governing the adjustment of refund claims against pending demands and highlights the significance of Section 11 of the Central Excise Act, 1944. The tribunal's decision provides clarity on the Department's authority to recover sums due to the Government and emphasizes the importance of finality in demand confirmation before resorting to recovery measures.