2022 (8) TMI 987 - HC - Central Excise

Refund of unutilised accumulated CENVAT credit - denial on the ground of limitation - principles of judicial discipline - September 2004 to June 2005 - October 2006 to September 2007 - HELD THAT - This Court in Karanja Terminal Logistic Pvt. Ltd. V/s. Principal Commissioner of Income Tax Ors. 2022 (2) TMI 442 - BOMBAY HIGH COURT following the judgment of the Apex Court in Union of India and Ors. V/s. Kamlakshi Finance Corporation Ltd. 1991 (9) TMI 72 - SUPREME COURT has held that it is of utmost importance that in disposing of the quasi-judicial issues before them, revenue officers are bound by the decisions of the appellate authorities. The order of CESTAT and the Commissioner (Appeals) is binding on respondent no.3. The principles of judicial discipline require that the orders of the higher appellate authorities should be followed unreservedly by the subordinate authorities. The mere fact that the order of the appellate authority was not acceptable to the department in itself would be an objectionable phrase and is the subject matter of an appeal can furnish no ground for not following it unless its operation has been suspended by a competent court. The Apex Court has held that if this healthy rule is not followed, the result will only be undue harassment to assessees and chaos in administration of tax laws. As there is no stay granted to the orders passed by CESTAT in the only appeal filed by petitioner and no appeal has been filed challenging the order dated 5th January 2016 of the Tribunal granting refund of Rs.1,29,60,000/- for September 2004 to June 2005 and no appeal having been filed against the 10 refund orders passed by the Commissioner (Appeals), respondent no.3 is obliged and bound to follow unreservedly the refund orders passed by CESTAT as well as the Commissioner (Appeals). Respondents are directed to pay interest to petitioner on refund amount for the applicable period in accordance with law. The interest will be payable after the expiry of three months from the date of the original refund claim - Petition disposed off.

Summary

Issues:
Challenging show cause notices denying refunds, time-barred refund claims, application of CENVAT credit, rejection of refund applications, appellate orders, pending appeals, refusal of refunds, legal implications of Explanation B (ec) of Section 11B, failure to follow appellate authorities' decisions, obligation to grant refunds, judicial discipline, issuance of writs of Certiorari and mandamus, interest on refund amounts.

Analysis:

1. Challenging Show Cause Notices Denying Refunds:
The petitioner contested two show cause notices seeking to deny refunds that had been previously allowed and finalized in judicial/quasi-judicial proceedings. The notices alleged that the reminder letters sent after the petitioner succeeded in the proceedings were treated as fresh refund claims and deemed time-barred. The petitioner argued against this treatment, emphasizing that the claims were filed within the prescribed time limits.

2. Time-Barred Refund Claims and CENVAT Credit Application:
The petitioner, engaged in back-office services, filed refund claims for accumulated unutilized CENVAT credit for specific periods. Despite initial rejection, subsequent appeals to higher authorities resulted in partial or full relief. The petitioner highlighted the inapplicability of Explanation B (ec) of Section 11B to their case, as the claims were filed within the stipulated time frames and subsequently approved by appellate bodies.

3. Failure to Grant Refunds Despite Appellate Orders:
Even after appellate authorities upheld the refund claims, the department failed to provide the refunds, leading the petitioner to make repeated requests and submissions. The court emphasized the importance of following appellate decisions and ensuring timely refund disbursement, especially when no appeals were lodged against favorable orders.

4. Legal Implications of Explanation B (ec) of Section 11B:
The court clarified that Explanation B (ec) of Section 11B is not applicable when refund claims are filed within the specified time limits and subsequently approved on appeal. The explanation is relevant only when a tax demand is set aside, resulting in a refund, which was not the scenario in the petitioner's case.

5. Judicial Discipline and Obligation to Grant Refunds:
Citing precedents, the court stressed the significance of judicial discipline, requiring subordinate authorities to adhere to appellate decisions unless suspended by a competent court. In the absence of any stay orders or appeals challenging favorable refund orders, the department was obligated to grant the refunds promptly.

6. Issuance of Writs and Interest on Refund Amounts:
The court allowed the petition, quashing the impugned show cause notices and directing the respondents to withdraw them. Additionally, the court ordered the immediate sanctioning of refund amounts along with applicable interest under Section 11BB, emphasizing the payment of interest after three months from the original refund claims and granting refunds within eight weeks from the court's order.

7. Conclusion:
The court disposed of the petition, emphasizing the obligation to provide refunds in compliance with appellate decisions and legal provisions. The respondents were directed to pay interest on the refund amounts and ensure timely disbursement, highlighting the importance of upholding judicial discipline and respecting appellate authorities' decisions.