2016 (7) TMI 636 - AT - Central Excise

Recovery of refund claim - whether refund already granted by the adjudicating authority can be recovered by issuing a show cause notice, without filing appeal challenging the order of adjudicating authority sanctioning the refund? - Held that - When no appeal was filed against order under Section 11B, the department cannot take recourse to Section 11 A. See Commissioner of Customs & Central Excise Vs Panyam Cements & Mineral Industries Ltd (2016 (4) TMI 688 - MADRAS HIGH COURT) - Decided in favour of assessee.

Summary

Issues:
Whether a refund already granted can be recovered without filing an appeal challenging the order of the adjudicating authority sanctioning the refund.

Analysis:
The appellants, engaged in manufacturing leather tanning chemicals, applied for a refund of central excise duty on discounts given to dealers. The original authority sanctioned the refund for different periods. Subsequently, show cause notices were issued proposing to recover the sanctioned refunds, which were confirmed as erroneous refunds by the original authority. The appellants appealed to the Commissioner (Appeals) who upheld the original authority's decision, leading to the appeal before the Tribunal.

The Respondent supported the findings, citing Section 11A of the Central Excise Act, contending that show cause notices were issued under this section as the sanctioned refund was deemed erroneous. The demand was confirmed post-adjudication, and the appellants were held liable to return the sanctioned refund with interest.

On behalf of the appellants, it was argued that the order sanctioning the refund was adjudicated and unchallenged by the Revenue in an appeal. Reference was made to Section 35E of the Central Excise Act, stating that without review and appeal, the Assistant Commissioner cannot order recovery of the sanctioned amount. The case of M/s Eveready Industries India Ltd Vs Cestat, Chennai was cited in support.

The Tribunal considered the case law cited and held that when an application for refund is allowed under Section 11B, the concept of 'erroneous refund' under Section 11A cannot be applied. The Court emphasized that if an order of refund is passed after adjudication, it does not fall under the category of erroneous refund. The Tribunal applied this reasoning to the present case, concluding that the impugned orders were not sustainable and set them aside, allowing the appeals with consequential reliefs.

In conclusion, the Tribunal ruled in favor of the appellants, highlighting the importance of following due process and the limitations on recovering sanctioned refunds without proper review and appeal mechanisms in place.