2019 (8) TMI 73 - AT - Central Excise

Refund of appropriated amount - Amount was recovered against CENVAT credit, but finally the demand was set aside - case of Revenue is that since the appellant has not challenged the appropriation and there was no direction in the remand order for sanctioning and returning the refund amount therefore that appropriation has become final and the appellant cannot claim the refund of the same - HELD THAT - Once the demand has been set aside on merits then the amount appropriated by the original authority at the stage when the appeal of the appellant was pending before the Commissioner is not tenable in law - Further, once the demand has been set aside, the amount appropriated by the Department is liable to be refunded to the appellants and there is no justification for retaining the said amount by the Department - Further, when unlawful demand has been set aside, the Department does not have any authority to retain the amount appropriated towards the said unlawful demand. The decision of the Tribunal in the case of ISPAT TRADERS VERSUS COMMISSIONER OF CUSTOMS, JAMNAGAR 2010 (9) TMI 346 - CESTAT, AHMEDABAD is very much applicable in the present case wherein the Tribunal has held that appropriation of the amount out of the refund amount payable in cash towards the demand confirmed in the said Order-in-Original is only a pre-deposit and once the said Order-in-Original has been set aside by the first Appellate Authority, the adjudicating authority in all fairness ought to have sanctioned the refund of the amount appropriated. Refund allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Denial and recovery of CENVAT credit on debit notes
- Appropriation of amount towards demand, interest, and penalty
- Refusal to refund wrongfully confirmed CENVAT credit
- Challenge to the impugned order

Denial and recovery of CENVAT credit on debit notes:
The case involved an appeal against the denial and recovery of CENVAT credit of a specific amount based on irregular availing on debit notes. The Department issued a show cause notice proposing to deny and recover the CENVAT credit, which was confirmed by the original authority. However, the Commissioner (Appeals) set aside the order and allowed the credit subject to verification of Service Tax paid on input services.

Appropriation of amount towards demand, interest, and penalty:
During the pendency of the appeal, the Department appropriated an amount towards the demand, interest, and penalty confirmed in the original order. The appellant argued that this appropriation was wrongful as the original authority had dropped the proceedings initiated for denial of CENVAT credit. The Commissioner (Appeals) remanded the case back to the original authority, which allowed the credit but refused to refund the wrongfully appropriated amount.

Refusal to refund wrongfully confirmed CENVAT credit:
The appellant contended that both the authorities wrongly rejected the refund of the appropriated amount, despite the original demand being set aside. The Department argued that since there was no direction in the remand order for refund, the appropriation had become final. The Tribunal found that the Department had no authority to retain the wrongfully appropriated amount once the demand was set aside.

Challenge to the impugned order:
The Tribunal, after considering submissions from both parties, held that the impugned order refusing to refund the wrongfully appropriated amount was not sustainable in law. The Tribunal set aside the order and allowed the appeal of the appellant with consequential relief, if any.

In conclusion, the Tribunal ruled in favor of the appellant, stating that the Department had no justification to retain the wrongfully appropriated amount once the demand was set aside. The decision was based on legal principles and precedents, emphasizing the importance of refunding amounts appropriated towards demands that were subsequently deemed unlawful.