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2017 (10) TMI 500 - AT - Central Excise100% EOU - Recovery of Refund - input services - N/N. 5/2006-CE (NT) dated 14.3.2006 - As it appeared that the activity carried out by the appellants did not amount to manufacture, thereby taking input credit of service tax paid as incorrect, the appellants were issued with seven show-cause notices proposing to recover the refund erroneously sanctioned - Held that - Tribunal in the case of M/s. Mineral Enterprises Limited Versus Commissioner of Customs and Service Tax 2017 (5) TMI 99 - CESTAT BANGALORE has already accepted the appeal of the present assessee by setting aside the Order-in-Appeal No.138/2008 dated 31.10.2008 passed by the Commissioner (A) and has held that the mining activity amounts to manufacture and is liable for payment of excise duty since the iron ore is an excisable goods within the meaning of Section 2(d) of the Central Excise Act, 1944. Also, the department has sought to recover the refund which has already been sanctioned without challenging the order sanctioning the refund, which is not permissible in law. Appeal allowed - decided in favor of appellant.
Issues:
1. Refund claims for service tax paid on input services by an Export Oriented Unit (EOU). 2. Validity of the demand for recovery of refunds sanctioned erroneously. 3. Whether the mining activity amounts to manufacture and is liable for excise duty. 4. Permissibility of reopening a case of refund without challenging the order sanctioning refund. Analysis: Issue 1: The appellants, a 100% Export Oriented Unit (EOU), filed refund claims for service tax paid on input services under Notification No.5/2006-CE (NT) for various periods. The refunds were sanctioned but were later challenged as the activity did not amount to manufacture, leading to the demand for recovery of the refunds along with interest under Section 11A and 11AA of the Central Excise Act. Issue 2: The main contention revolved around the permissibility of the Revenue to recover the refunds sanctioned erroneously without challenging the order sanctioning the refund. The appellant argued that the impugned order was contrary to binding judicial precedents and that the Department cannot issue show-cause notices for demanding refunds already sanctioned without challenging the original refund order. Issue 3: The crucial question was whether the mining activity conducted by the appellants amounts to manufacture and is liable for payment of excise duty. The Tribunal, in a previous order, had held that mining activity is considered as manufacture and is subject to excise duty since iron ore is classified as excisable goods under the Central Excise Act. Issue 4: Another issue raised was the permissibility of reopening a case of refund without challenging the original order sanctioning the refund. The appellant relied on various decisions to support their argument that if a refund claim has not been challenged, the Department cannot proceed to recover the refund under Section 11A of the Central Excise Act. Final Decision: After considering the submissions and precedents cited, the Tribunal held that the impugned orders were not sustainable in law. The Tribunal set aside the orders by allowing the appeals of the appellants, emphasizing that the mining activity amounts to manufacture and the Revenue cannot recover refunds without challenging the original refund order.
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