2023 (7) TMI 661 - HC - Central Excise

Recovery of erroneous refund which was sanctioned under Notification No. 56 of 2002-CE - refund was granted on the basis of any approval, acceptance and assessment relating to the rate of duty - extended period of limitation - HELD THAT - From a reading of Section 11A of Central Excise Act, it clearly transpires that when any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the Central Excise Officer, may within six months from the relevant date, serve a notice on the person chargeable with the duty which has not been so levied or paid or which has been so short-levied or short-paid or to whom the refund has erroneously been made to show why he should not be asked to pay the amount specified in the notice. Indisputably, in the instant case, the period of six months from the relevant date has since expired. To put it more clearly, the expression relevant date is defined under sub-section 3 (ii) of Section 11A of the Act. Neither side has disputed that the limitation, provided for issuance of show cause notice in terms of sub-section 1 of section 11 A of the Act had expired much prior to the issuance of show cause notice to the respondent - The sine quo non for invoking the proviso is to demonstrate by reference to material on record that the assessee had claimed and has been paid erroneous refund of the excise duty by reason of fraud, collusion or any willful misstatement or suppression of facts or contravention of any provisions of the Act and the rules framed thereunder and that this fraud, collusion, willful misstatement or suppression of facts etc., is made with an intention to evade payment of duty by the assessee or his agent. There are no sufficient material on record to come to the conclusion that the respondent, with an intention to evade payment of duty, suppressed or misstated any facts relating to the manufacturing process and the product which it produced and passed on by payment of excise duty. Whether the product produced by the respondent is a Gibbereillic acid simplicitor or is a plant growth regulator containing Gibbereillic acid as dominant ingredient, is a question of fact which cannot be gone into by this Court hearing an appeal on a substantial question of law - the extended period of limitation as provided under provision to sub -section (1) of Section 11A was not invocable for the simple reason that the twin factors which are sine quo non for invoking the proviso were missing in the instant case. The Supreme Court in Grasim Industries Ltd vs Commissioner of Central Excise 2011 (8) TMI 689 - SUPREME COURT has only held that, once a show cause notice, in terms of section 11A of the Act has been issued by the revenue department to the assessee for recovery of erroneous refund made to it, the remedy of the aggrieved assessee is provided under section 11A itself. The judgment therefore cannot be held to lay down a proposition of law that section 11A is invocable even in a case where there is no erroneous refund, rather the refund of the excise duty is pursuant to a speaking order passed by the Adjudicating Authority after following due process of law. Such order passed by the Assessing Authority is appealable under Section 35 of the Act or the competent Authority of the revenue may invoke Section 35E of the Act and direct the concerned Authority to take an appropriate remedy against such order sanctioning erroneous refund, if any, in favour of the assessee. In the instant case, the refund sanctioned by the adjudicating authority in favour of the respondent was after proper application of mind and by passing of speaking orders and therefore, cannot be termed as erroneous refund for the purposes of section 11A of the Act. The extended period of limitation provided under proviso to sub section 1 of section 11A is not attracted as there are no material on record to demonstrate that the purported erroneous refund was sanctioned in favour of the respondent-assessee on the basis of some fraud, collusion or misstatement /misrepresentation of facts and, that too, with an intention to evade payment of excise duty. The revenue has also failed to make out a case of unjust enrichment having failed to show as to how the respondent has been benefited by such purported erroneous refund sanctioned in its favour by the Competent Authority. There are no merit in this appeal - Appeal dismissed.

Summary

Issues Involved:

1. Invocability of extended period of limitation under Section 11A(1) of the Central Excise Act, 1944.
2. Legitimacy of recovery of erroneous refund without challenging the initial refund orders.

Summary:

1. Invocability of Extended Period of Limitation:

The Revenue argued that the respondent willfully suppressed/misstated facts to claim an erroneous refund, justifying the invocation of the extended period of limitation under the proviso to Section 11A(1) of the Central Excise Act, 1944. However, the court found no material evidence suggesting willful suppression or misstatement by the respondent. The respondent had transparently disclosed the manufacturing process and the product details through periodical returns and audits. Thus, the court concluded that the extended period of limitation was not applicable as the twin factors of fraud or willful suppression were absent.

2. Legitimacy of Recovery of Erroneous Refund:

The court upheld the CESTAT's decision that the refund orders, which were not challenged by the Revenue and had attained finality, could not be termed as 'erroneous refund' and recovered under Section 11A. The orders sanctioning the refund were passed after due process and were appealable under Section 35 of the Act. The court emphasized that unless these orders were reversed in appeal or revision, they could not be invalidated through collateral proceedings under Section 11A. The court also referenced Supreme Court judgments in Priya Blue Industries Pvt. Ltd. and Flock India Pvt. Ltd., affirming that Section 11A is not invocable in such scenarios.

Conclusion:

The court dismissed the appeal, affirming that the refund sanctioned by the adjudicating authority after proper application of mind and passing of speaking orders could not be termed as 'erroneous refund' for the purposes of Section 11A. The extended period of limitation was not attracted due to the lack of evidence of fraud, collusion, or willful misstatement. The Revenue also failed to demonstrate unjust enrichment by the respondent.