1990 (9) TMI 177 - AT - Central Excise

Summary

Issues Involved:
The issues involved in this case are the rejection of refund application by Assistant Collector, the direction by Collector to file an appeal regarding excess refund, the time limit for filing the appeal under Section 35E(2) of the Central Excises & Salt Act, 1944, the calculation error leading to excess refund, and the procedural requirements for recovering an erroneously made refund.

Rejection of Refund Application:
The appellants, who manufacture Asbestos Cement Products, initially paid duty without excluding freight expenses. Upon realizing the error, they filed refund claims totaling Rs. 1,72,27,253.00. The Assistant Collector rejected the refund application, but the Collector allowed the appeal and remanded it for quantification of actual freight and verification of refund claims. Subsequently, the Assistant Collector verified and sanctioned a refund of Rs. 49,57,243.57 out of the total amount.

Direction to File Appeal for Excess Refund:
The Collector, under Section 35E(2) of the Act, directed the Assistant Collector to file an appeal regarding an excess refund of Rs. 8,639.25 due to an arithmetic mistake in the calculations. An appeal was filed, and the Collector set aside the order of the Assistant Collector, leading to the current appeal.

Time Limit for Filing Appeal:
A key contention raised was regarding the time limit for filing the appeal under Section 35E(2). The appellant argued that the appeal was beyond the limitation period provided under Section 11A of the Act, citing a relevant case law. However, the Department contended that the appeal was within time as per the provisions of Section 35E(2) and referred to a precedent to support this argument.

Calculation Error and Recovery of Erroneous Refund:
The Collector found an excess refund due to an arithmetic mistake in the calculations and directed the filing of an appeal. It was emphasized that without setting aside the order granting the erroneous refund, the cause of action for recovery does not arise. The order under Section 35E(2) should be followed by a show cause notice under Section 11A within the prescribed time limits for effective recovery.

Procedural Requirements for Recovery:
The judgment highlighted the procedural requirements for recovering an erroneously made refund. It was noted that the appeal under Section 35E(2) is maintainable, but for enforcement, a show cause notice under Section 11A should precede the proceedings. In this case, as the show cause notice was not issued within the required time frame, the order for setting aside the refund could not be enforced.

Conclusion:
The appeal was allowed, setting aside the order of the Collector, as the refund erroneously made could not be recovered due to procedural lapses. The judgment emphasized the importance of following the prescribed procedures under Section 35E(2) and Section 11A for effective recovery of an erroneous refund.