2024 (6) TMI 1179 - HC - Central Excise

Recovery of Modvat/Cenvat Credit availed along with interest and penalty - receiving certain raw materials based on purchase invoices, without actually physically receiving any material and availed Cenvat credit - HELD THAT - The petitioners have paid the amount of Rs. 12,90,000/- during the course of search. The said amount was adjusted towards the outstanding demand by the adjudicating authority while passing the Order-in-Original dated 26.8.2004. Petition dismissed.

Summary

Issues:
1. Calculation and grant of interest on deposited amount.
2. Appropriation of deposited amount towards demand.
3. Adjudication process and appeals.
4. Refund application and interest payment.

Issue 1: Calculation and grant of interest on deposited amount
The petitioners sought a writ for the respondent authorities to calculate and grant interest at 12% from the date of deposit of Rs. 12,90,000 till date, with a fallback of 9% interest if not done within 30 days. The petitioners deposited the amount following an intelligence search in 1999, and a show cause notice was later issued seeking recovery of a larger sum. The Order-in-Original disallowed modvat credit and appropriated the deposited amount towards the demand. After multiple appeals and remands, the Commissioner (Appeals) finally quashed the demand in 2021. The petitioners then applied for a refund, which was partially granted with interest from the date of the Commissioner's order, not the deposit date. The petitioners contended that interest should be paid from the deposit date, citing legal precedents and arguing that the amount was withheld without authority.

Issue 2: Appropriation of deposited amount towards demand
The Order-in-Original confirmed the demand and appropriated the deposited amount against it. Subsequent appeals and remands led to the quashing of the demand by the Commissioner (Appeals) in 2021. The petitioners filed for a refund, which was partially granted, but interest was calculated from the Commissioner's order date, not the deposit date. The petitioners argued that the amount was coercively collected during the search and should accrue interest from the deposit date, citing legal decisions to support their claim.

Issue 3: Adjudication process and appeals
The adjudication process involved multiple stages, with appeals filed by the petitioners against adverse orders. The Commissioner (Appeals) remanded the case for fresh adjudication due to procedural lapses, leading to repeated confirmations of the demand with interest and penalty. The Commissioner (Appeals) finally allowed the appeal in 2021, quashing the demand. The petitioners then sought a refund of the deposited amount, leading to a dispute over the calculation of interest from the deposit date.

Issue 4: Refund application and interest payment
After the Commissioner (Appeals) quashed the demand, the petitioners applied for a refund of the deposited amount. The refund application was granted, but interest was calculated from the Commissioner's order date, not the deposit date. The petitioners contended that interest should accrue from the deposit date, as the amount was coercively collected during the search. Legal arguments and precedents were cited to support the petitioners' claim for interest payment from the deposit date.