2022 (8) TMI 536 - AT - Central Excise

Pre-deposit for the purpose of refund - amount deposited during investigation - Refund claim - tiime limitation - HELD THAT - The Board has issued Circular No. 984/8/2014-CX dated 16.09.2014 wherein it has been clarified in para 3, that payment made during investigation or audit, prior to the date on which appeal is filed, shall be considered as pre-deposit for the purpose of appeal to the extent of the percentage specified under Section 35F (required for the purpose of pre-deposit). It is further stipulated in para 3.2 that from the date of filing appeal, the amount deposited shall be deemed to be the date of pre-deposit under Section 35F - para 5 of the Circular mentions that when the appeal is decided in favour of the assessee, he shall be entitled to refund of the amount deposited alongwith the interest at the prescribed rate, as per Section 35FF of the Act. It is found from the plain reading of Section 35FF of the Act, that there is no application of Section 11B in respect of refund arising, on being successful in appeal. This has also been clarified in para 5 of the aforementioned Circular of the Board. Accordingly, the impugned order is erroneous and against the provisions of law - The Adjudicating Authority is directed to grant the refund of the said amount of Rs.6,51,300/- with interest from the date of reversal (dated 02.02.2011), till the date of grant of refund. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Cenvat credit availed on certain items disallowed during audit.
2. Reversal of the disputed amount by the appellant.
3. Show cause notice issued proposing duty demand, appropriation, and penalty.
4. Adjudication confirming the demand and penalty.
5. Appeal filed before Commissioner (Appeals) and subsequently before the Tribunal.
6. Rejection of refund claim on grounds of limitation.
7. Interpretation of Circular No. 984/8/2014-CX regarding pre-deposit for appeal.
8. Entitlement to refund upon success in appeal.
9. Application of Section 11B in the context of refund.

Analysis:
The case involved the disallowance of Cenvat credit amounting to Rs.11,53,506/- on various items by the appellant, a registered manufacturer, during the period of September 2009 to April 2010. Following an audit objection, the appellant reversed a portion of the amount in the Cenvat register. Subsequently, a show cause notice was issued proposing duty demand, appropriation, and penalty. The order-in-original confirmed the demand and penalty, leading the appellant to file appeals before the Commissioner (Appeals) and the Tribunal. The Tribunal, in a previous order, set aside the impugned order and allowed the appeal, resulting in the appellant seeking a refund of the reversed amount.

The refund claim of Rs.6,51,300/- was rejected on the grounds of limitation under Section 11B of the Act, stating that the amount deposited during the investigation did not qualify as a pre-deposit for the purpose of refund. The Tribunal, after hearing the parties and perusing the records, referred to Circular No. 984/8/2014-CX. The Circular clarified that payments made during investigation or audit, before filing an appeal, shall be considered as pre-deposit to the extent specified under Section 35F. It further outlined that successful appellants are entitled to a refund of the deposited amount along with interest.

The Tribunal emphasized that the refund arising from a successful appeal does not fall under the purview of Section 11B, as clarified in the Circular. Therefore, the impugned order was deemed erroneous, and the Tribunal directed the Adjudicating Authority to grant the refund of Rs.6,51,300/- with interest from the date of reversal. The Tribunal concluded by allowing the appeal and ordering the refund to be processed promptly, in line with the Circular's provisions and the relevant legal framework.