2021 (12) TMI 284 - AT - Central Excise

Refund of amount deposited as pre-deposit - amount deposited in excess of the mandatory pre-deposit shall be treated as deposit under section 35 F of the Central Excise Act or not? - para 3 of Circular No.984/08/2014 dated 16.09.2014 - HELD THAT - The impugned refund cannot be called as refund of amount of pre-deposit nor has been claimed so by the appellant. The amount to the extent of pre-deposit out of aforesaid ₹ 66 Lakhs was ₹ 44 Lakhs which has already been refunded in favour of the appellant. The proposals of duty demand have been set aside. Hence, it becomes clear that appellant was not liable to pay ₹ 66 Lakhs. ₹ 44 Lakhs whereof were required as an amount of pre-deposit till the appeal of the appellant was not decided by the Tribunal. Once the Tribunal s order setting aside the demand had attained finality, the amount equivalent to the 10% of the impugned duty was calculated as ₹ 44 Lakhs, hence, was refunded. However, ₹ 21 Lakhs is also part of such money of appellant for which he was never liable towards the Department. Accordingly, Department is not entitled to retain the same or to become unjustly rich by retaining the money of the assessee. Once the proposed duty demand against the appellants stands set aside, the entire basis of deposit as was made by the appellant fails to survive. Department cannot be allowed to retain any part of the said amount. The amount of ₹ 21 Lakhs is an amount of deposit made under protest it cannot be called as duty. Question of applicability of section 11B of Central Excise Act does not at all arise. The findings of Commissioner (Appeals) to this effect are, therefore, held to be wrong. Rejection to the extent of ₹ 6 Lakhs on the ground of no proof for said amount to be debited from the credit ledger - HELD THAT - It is observed from the record that the said amount of ₹ 6 Lakhs is depicted in ER-1 for the period June, 2017 as a closing balance. The GST regime was introduced w.e.f. July 1, 2017. It is also observed that the said amount has not been claimed as credit under GST through form GST TRAN-1. Hence, it was the amount which is standing as a closing balance in ER-1 as on June 30, 2017 which was not transferred to GST Regime. Hence, is as good as the cash lying with the Department and has to be treated as equal to the debit of the Cenvat account in terms of Section 142 of GST Act. The said amount has mandatorily to be refunded to the assessee in cash. It stands clear that appellant is entitled for refund of ₹ 15 Lakhs as were paid in cash by him at the time of the investigation of the impugned proceedings and is also entitled for refund of ₹ 6 Lakhs in cash as was being paid from his Cenvat Credit Account at the same stage as mentioned above and that appellant has been held to not to be liable to pay the alleged amount of duty which includes said ₹ 21 Lakh also. Accordingly, the refund claim of ₹ 21 Lakhs has wrongly been rejected by the Adjudicating Authority below. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Refund claim rejection of &8377; 21 Lakhs upheld by Commissioner (Appeals) - Appeal before CESTAT - Appellant's contention of wrongly considered payment of duty and balance &8377; 6 Lakhs - Appellant's argument under section 142 of CGST Act - Department's reliance on Circular No.984/08/2014 - Applicability of section 11B of Central Excise Act - Rejection of &8377; 6 Lakhs for lack of proof in credit ledger - Entitlement of appellant for refund of &8377; 15 Lakhs and &8377; 6 Lakhs - Final decision on refund claim.

Analysis:
The case involved the rejection of a refund claim of &8377; 21 Lakhs by the Commissioner (Appeals), upheld by the Adjudicating Authority, which was challenged before the CESTAT. The appellant argued that the rejection was incorrect, emphasizing that &8377; 15 Lakhs was wrongly considered as a payment of duty and the remaining &8377; 6 Lakhs was rejected without proof of debit in the pre-GST regime. The appellant cited section 142 of the CGST Act to support their claim for refund. The Department relied on Circular No.984/08/2014 and the applicability of section 11B of the Central Excise Act to justify the rejection. However, the CESTAT found that the appellant was not liable to pay the total amount of &8377; 66 Lakhs, as a significant portion had already been refunded as pre-deposit. The CESTAT emphasized that the &8377; 21 Lakhs was not part of the pre-deposit and should be refunded to the appellant, as the duty demand had been set aside. The Tribunal also highlighted a previous court decision to support the appellant's claim that the amount was a "deposit made under protest" and not duty paid.

Regarding the rejection of the &8377; 6 Lakhs, the CESTAT observed that the amount was shown as a closing balance in the pre-GST regime and not transferred to the GST regime. As per Section 142 of the GST Act, this amount had to be refunded to the appellant in cash. Therefore, the Tribunal concluded that the appellant was entitled to a refund of both the &8377; 15 Lakhs paid in cash during the investigation and the &8377; 6 Lakhs from the Cenvat Credit Account. The Adjudicating Authority's decision to reject the refund claim of &8377; 21 Lakhs was set aside, and the appeal was allowed in favor of the appellant. The order for refund was pronounced in the open court on 03.12.2021.