2015 (9) TMI 726 - HC - Central Excise

Refund claim - Duty paid under protest - tribunal allowed the refund claim on the ground that, no proceedings were issued under Section 11A of the Act - recovery of refund which was earlier paid to the assessee - Held that - in view of operation of Rule 233B the duty as approved had become final. In the first place the refund application is misconceived and was not maintainable as the respondent failed to avail the remedies available under the Act. Sections 11A and 11B of the Act are two independent provisions and parameters which are required to be considered in the process of application under Sections 11A and 11B of the Act being totally different and independent there is no interconnection between the same. The orders passed under both the Sections 11A and 11B of the Act are amenable for appeal and further appeal to the higher forums. There is no warrant for one to conclude for implementing the orders passed under Section 11A of the Act recourse is to be taken to the provisions of Section 11A of the Act. We are not impressed with the argument of the learned counsel for the respondent that the authorities being bound by the circular and it is not open for the authorities not to implement the same. In view of the judgment of the Supreme Court in Minwool Rock Fiber Ltd case (2012 (2) TMI 289 - SUPREME COURT OF INDIA ), the departmental circulars are not binding on the Tribunal and at any rate, the Tribunal did not say that they are bound by the circulars. In the words of the Supreme Court in MADRAS RUBBER FACTORY LTD 1981 (1) TMI 68 - HIGH COURT OF MADRAS Coming to the question that is raised there is little scope for doubt that in a case where an adjudicating authority has passed an order which is appealable under the statute and the party aggrieved did not choose to exercise the statutory right of filing an appeal, it is not open to the party to question the correctness of the order of the adjudicating authority subsequently by filing a claim for refund on the ground that the adjudicating authority had committed an error in passing his order. If this position is accepted then the provisions for adjudication in the Act and the Rules, the provision for appeal in the Act and the Rules will lose their relevance and the entire exercise will be rendered redundant. This position, in our view, will run counter to the scheme of the Act and will introduce an element of uncertainty in the entire process of levy and collection of excise duty. Such a position cannot be countenanced. Section 11A of the Act as amended by the Finance Act with retrospective effect may be noticed. By the time the appellate authority came to consider the appeal the amended provision came into existence. A careful reading of the amended provision sets out the scope of Section 11A of the Act. The short levy or short payment or erroneous refund, as the case may be, should be on the basis of any approval, acceptance or assessment relating to the rate of duty on or valuation of excisable goods under any other provisions of this Act or the Rules made thereunder. In the facts of the case the refund order was granted ignoring the fact that the duty payable as per the approved list became final on account of not pursuing the protest petition. - Decided in favour of Revenue.

Summary

Issues Involved:
1. Whether an appeal can be filed before the appellate authority under Section 35E of the Act and the recovery of erroneous refund can be based on the decision of the appellate authority.
2. Whether show cause notice is required to be issued within the time limit laid down in Section 11A of the Act for recovery of such erroneously granted refund.
3. Whether, in the fact and circumstances of the case, the resort to Section 11A of the Act is mandatory for recovering the refund granted pursuant to the adjudication order passed under Section 11B of the Act which adjudication order subsequently came to be declared as unsustainable.

Detailed Analysis:

1. Appeal under Section 35E and Recovery of Erroneous Refund:
The court examined whether the independent proceedings under Section 11A of the Act are required to recover sums refunded to the respondent. The learned counsel for the appellant argued that the Tribunal erred in holding that independent proceedings under Section 11A are required for recovering the refunded money. The refund was made based on an adjudication order that was later set aside, and thus, the recovery should be seen as restitution, not erroneous refund. The court noted that the refund was granted after an adjudication process under Section 11B, and such refunds are outside the scope of erroneous refunds under Section 11A. The court concluded that Sections 11A and 11B operate independently, and there is no need to initiate proceedings under Section 11A for implementing orders passed under Section 11B.

2. Requirement of Show Cause Notice under Section 11A:
The court examined whether a show cause notice under Section 11A is mandatory for recovering the refund. The learned counsel for the respondent argued that the only way to recover the erroneously refunded duty amount is through Section 11A, and no other provisions in the Act allow for such recovery. The court analyzed the statutory scheme and noted that the refund order granted by the Assistant Commissioner was erroneous and not maintainable. The court held that the refund was made in the process of adjudicating a claim under Section 11B, and since the determination of the refund claim did not result in an erroneous refund, the provisions of Section 11A do not apply. The court emphasized that the orders passed under Sections 11A and 11B are appealable, and there is no need for separate proceedings under Section 11A for recovering the refund.

3. Resort to Section 11A for Recovering Refund:
The court framed an additional question regarding the mandatory nature of resorting to Section 11A for recovering refunds granted under Section 11B. The court noted that the refund order was granted based on an erroneous adjudication, and the appellate authorities set aside the order. The court held that the refund was not an erroneous refund under Section 11A but rather a result of implementing an adjudication order. Therefore, the recovery of the refunded amount does not require independent proceedings under Section 11A. The court also referenced several judgments to support its conclusion that Sections 11A and 11B operate independently, and the recovery of refunds granted under Section 11B does not necessitate proceedings under Section 11A.

Conclusion:
The court allowed the appeal, answering all three questions in favor of the revenue and against the assessee. The judgment emphasized that Sections 11A and 11B operate independently, and the recovery of refunds granted under Section 11B does not require separate proceedings under Section 11A. The court granted six weeks for the respondent to pay the erroneously refunded amount.