2024 (12) TMI 892 - HC - Customs

Legality of recovery of refund without appealing the original refund order - ignoring the strict compliance with the various conditions of N/N. 102/2007-Cus. - correctnes of relying on the certificates issued by the statutory auditor without examining various evidences emerged during investigation indicating that the refund had been fraudulently claimed on the basis of forged documents - HELD THAT - It appears that based on the information gathered that the assessee had claim refund of 4% SAD that had been paid at the time of import of timber incorrectly by submitting sale invoice of timber imported under some other Bill of Entry, a search was carried out at the business premises of the assessee by the DGCEI. On the basis of such investigation report, show cause notices were issued by the revenue and the adjudicating authorities took the view that the assessee had submitted forged documents with the customs authority with a view to get the refund fraudulently by not declaring the factual position and suppressing the material facts i.e. clearance of different timber which did not pertain to the Bill of Entry for which they claimed refunds on the basis of preparation of forged invoices etc. Such facts came to the notice of the department only after initiation of investigation against the assessee by adopting such modus operandi, the assessee received the refund which otherwise would not have been sanctioned and thereby contravened the provisions of Section 27 of the Customs Act, 1962 read with provisions of Notification No. 102/2007-Cus dated 14.09.2007. The extended period of recovery of refunds so sanctioned erroneously to the assessee was invoked in all the cases and the adjudicating authority passed the orders to recover the refund sanctioned earlier by denying the benefits under N/N. 102/2007-CUS dated 14.9.2007 under the provision of Section 28 of the Customs Act, 1962 along with interest and penalty. Considering the facts of the case and on perusal of the impugned order passed by the Tribunal, it is opined that these appeals are being devoid of any merit that no questions of law much less any substantial questions of law arises from the impugned order passed by the Tribunal - appeal dismissed.

Issues Involved:

1. Legality of recovery of refund without appealing the original refund order.
2. Compliance with Notification No. 102/2007-Cus regarding refund claims.
3. Validity of CESTAT's decision in light of pending appeals.
4. Reliance on statutory auditor's certificates amidst allegations of fraudulent refund claims.
5. Appropriateness of CESTAT's decision to allow the respondent's appeal with consequential relief.

Issue-wise Detailed Analysis:

1. Legality of Recovery of Refund Without Appealing the Original Refund Order:

The core issue was whether the revenue could initiate recovery of a refund without first appealing the original order that sanctioned the refund. The Tribunal concluded that once the refund order was upheld by the CESTAT and not further challenged, it attained finality. Consequently, any attempt to recover the refund through a fresh show cause notice was deemed illegal. The Tribunal emphasized that the refund order must be directly appealed to a higher court for recovery, aligning with the Supreme Court's ruling that recovery cannot be pursued through a separate notice if the original order is not appealed.

2. Compliance with Notification No. 102/2007-Cus Regarding Refund Claims:

The revenue contended that the refund claims were not compliant with Notification No. 102/2007-Cus due to discrepancies in the sales invoices, specifically the lack of details about the number of logs sold. However, the Tribunal found that the investigating authority failed to verify the transactions with the customers, undermining the revenue's allegations. The Tribunal determined that the appellants complied with the notification's conditions, and the absence of log details in the invoices did not justify recovery of the refund.

3. Validity of CESTAT's Decision in Light of Pending Appeals:

The revenue argued that the Tribunal incorrectly stated that its order was not further challenged, as appeals were pending before the High Court. Despite this, the Tribunal maintained that the refund order had attained finality at the CESTAT level, and the pending appeals did not affect this status. The Tribunal dismissed the revenue's appeal, asserting that no substantial questions of law arose from its order.

4. Reliance on Statutory Auditor's Certificates Amidst Allegations of Fraudulent Refund Claims:

The Tribunal was criticized for relying on statutory auditor's certificates despite allegations of fraudulent refund claims based on forged documents. The revenue alleged that the assessee obtained refunds through misrepresentation. However, the Tribunal found no substantial evidence from the investigation to support these claims, noting that the refund sanctioning authority did not dispute the sales transactions or compliance with the notification.

5. Appropriateness of CESTAT's Decision to Allow the Respondent's Appeal with Consequential Relief:

The Tribunal's decision to allow the respondent's appeal with consequential relief was based on its findings that the refund was legally sanctioned and that the revenue's recovery attempt was unwarranted. The Tribunal held that the refund could not be deemed erroneous as it was upheld by the CESTAT and not successfully challenged by the revenue. This decision was consistent with legal precedents, reinforcing the finality of the CESTAT's order in the absence of a successful appeal.

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