2022 (6) TMI 301 - AT - Central Excise

Adjustment of interest and penalty from the refundable amount - Whether from the refundable amount, adjustment have been rightly made for the amount of interest and penalty, which is sub judice before the higher court of appeal? - HELD THAT - Section 11 of the Central Excise Act grants power to the Central Excise officers, being in the nature of special power of recovery, which in the nature of garnishee proceedings . The Adjudicating Authority is empowered to not only adjust arrears of tax recoverable from the assessee from any money/refund which is in the hands of the authority payable to the assessee, further empowers to issue certificate for adjustment to another Central Excise Officer who may have any money payable to the assessee, and also empowers to issue certificate to the District Collector for recovery of tax dues as arrears of land revenue. Such power of adjustment cannot be exercised for demand of tax/interest/penalty which is sub judice. Admittedly, in the facts of the present case, the amount of interest and penalty are sub judice before this Tribunal and this fact was admittedly in the knowledge of the court below. The adjustment made from the amount refundable to the appellant is bad and the same is set aside. The Adjudicating Authority directed to grant the refund of balance amount of Rs. 42,02,518/- in cash alongwith interest under Section 35FF of Central Excise Act - Appeal allowed - decided in favor of appellant.

Summary

Issues involved:
1. Adjustment of interest and penalty from the refundable amount
2. Validity of adjustment in light of the sub judice status of interest and penalty

Analysis:
Issue 1: The primary issue in this appeal was whether the adjustment made for the amount of interest and penalty from the refundable amount was correct. The appellant disputed the disallowance of Cenvat credit, interest, and penalty imposed under Rule 15. The total demand confirmed was Rs. 4,41,29,475, out of which Rs. 2,76,72,703 was paid and not disputed. The appellant filed a refund claim for the balance amount of Rs. 1,11,49,884, which was partially adjusted towards interest and penalty, leading to a granted refund of Rs. 69,47,366.

Issue 2: The crux of the matter revolved around the validity of the adjustment in light of the sub judice status of the interest and penalty. The appellant contended that the adjustment was improper as the interest and penalty were under appeal before the Tribunal. The Tribunal, after considering the arguments, held that the power of adjustment under Section 11 of the Central Excise Act cannot be exercised for demands that are sub judice. The Tribunal found that the adjustment made from the refundable amount was unjust and ordered the Adjudicating Authority to grant the balance refund of Rs. 42,02,518 in cash along with interest under Section 35FF of the Central Excise Act.

In conclusion, the Tribunal allowed the appeal, emphasizing that adjustments from refundable amounts should not be made for demands that are sub judice, ensuring justice and fairness in the process.