2021 (2) TMI 1044 - HC - Central Excise

Refund of tax amount paid - Amount paid under protest - applicability of time limitation - It is the case of the petitioner that by oversight it had not paid duty on goods captively consumed and had also wrongly availed Input Tax Credit, MODVAT Credit under the provisions of the Central Excise Rules, 1944 - HELD THAT - Excess after adjustment of cumulative tax liability has to be refunded back. Question of invoking the limitation prescribed under Section 11B of the Central Excise act, 1944 is misplaced as the amount paid pending investigation are nothing but the amount paid under protest as has been held by the Hon able Supreme Court in MAFATLAL INDUSTRIES LTD. VERSUS UNION OF INDIA 1996 (12) TMI 50 - SUPREME COURT . Thus, the observation of the first respondent Settlement Commission that the petitioner was required to file a refund claim within one year from 11.01.2002, i.e on or before 11.01.2003, cannot be countenanced. The amount that was paid by the petitioner was otherwise liable to be adjusted or refunded subject to outcome of the Show Cause Notice dated 02.12.2002. The petitioner opted to settle the case before the first respondent Settlement Commission by offering an amount of ₹ 24,13,268/- in full and final settlement of its tax liability under the case initiated by the second respondent - Under the circumstances, the amount that was paid by the petitioner in excess of the amounts due for the period covered by the Show Cause Notice towards captive consumption of paper cone and bleach liquor was to be adjusted towards the tax liability towards input tax credit wrongly availed by the petitioner and balance if any was liable to be refunded to the petitioner. Though the petitioner had voluntarily paid the aforesaid amount during the course of investigation, in absence of the appropriation of the excess amount towards any other tax/duty liability of the petitioner, it was to be refunded back from the date of the impugned order of the first respondent Settlement Commission. The first respondent Settlement Commission cannot artificially impose a new period of limitation especially when the proceedings were pending before it - Having granted immunity and the waiver from payment of penalty, the amount paid in excess by the petitioner before the second respondent cannot be retained by the second respondent on the ground that the refund claim was time barred. The impugned order directing the petitioner to pay a sum of ₹ 9,36,279/- within 30 days and refusing to refund the balance amount is liable to be quashed - Refund allowed - petition allowed - decided in favor of petitioner.

Summary

Issues Involved:
1. Legitimacy of the Settlement Commission's decision rejecting the modification of the final order and the refund request.
2. Appropriation and refund of excess amounts paid during investigation.
3. Applicability of the limitation period for filing refund claims under Section 11B of the Central Excise Act, 1944.
4. Waiver of interest and penalty, and immunity from prosecution under Section 32K of the Central Excise Act, 1944.

Issue-wise Detailed Analysis:

1. Legitimacy of the Settlement Commission's Decision:
The petitioner sought to quash the Settlement Commission's decision communicated via letter dated 18.09.2018, which rejected the request to modify the Final Order No.12/2018 C.Ex dated 27.08.2018 and denied a refund of ?3,87,657/-. The petitioner argued that the amount paid during the investigation was a deposit and should be refunded. The Commission dismissed the application, stating that the petitioner failed to disclose its tax liability fully and truly.

2. Appropriation and Refund of Excess Amounts Paid:
The petitioner paid a total of ?28,00,923/- during the investigation for duty liabilities on captively consumed paper core and bleach liquor. The Show Cause Notice issued by the second respondent proposed to appropriate ?14,76,987/- of this amount. The petitioner argued that the balance amount of ?13,23,936/- should be refunded or adjusted towards other tax liabilities. The court held that the amount paid during the investigation was a deposit and should be adjusted or refunded, subject to the outcome of the Show Cause Notice.

3. Applicability of Limitation Period for Filing Refund Claims:
The Settlement Commission stated that the petitioner should have filed a refund claim within one year from 11.01.2002, as per Section 11B of the Central Excise Act, 1944. The court disagreed, referencing the Supreme Court's decision in Mafatlal Industries Ltd. v. Union of India, which held that amounts paid under protest are not subject to the limitation period. The court concluded that the excess amount paid was liable to be refunded or adjusted, and the limitation period did not apply as the proceedings were pending.

4. Waiver of Interest and Penalty, and Immunity from Prosecution:
The Settlement Commission granted the petitioner a complete waiver from payment of interest and penalty and immunity from prosecution under Section 32K of the Central Excise Act, 1944. The court noted that, given this waiver and immunity, the excess amount paid by the petitioner could not be retained by the respondents on the grounds of being time-barred for refund.

Conclusion:
The court quashed the impugned order directing the petitioner to pay ?9,36,279/- and refusing the refund of the balance amount. The respondents were directed to appropriate ?9,36,279/- from the balance amount of ?13,23,936/- and refund ?3,87,657/- with interest as per Section 35FF of the Central Excise Act, 1944. The refund was to be processed within eight weeks from the receipt of the court's order. Consequently, the related writ petitions and miscellaneous petitions were closed without costs.