2021 (6) TMI 511 - AT - Central Excise

Denial of Refund claim - denied on the ground that the claim is nowhere related to Section 35F - Section 11B of Central Excise Act 1944 - HELD THAT - Once the appeal was admitted thereafter the appellant sought the refund of the amount recovered by the Deputy Commissioner without serving the Order-in-Appeal. It is really strange that after the decision of the Commissioner (Appeals) dated 30.12.2014, no recovery proceedings was initiated by the Department for 4 years and all of a sudden after more than 4 years, the recovery was sought by writing a letter and that too without supplying the copy of the Order-in-Appeal passed by the Commissioner (Appeals). Further, I find that the authorities below has wrongly considered the said refund under Section 11B of the Central Excise Act whereas the appellant has sought the refund on the ground that once he has filed the appeal before the Tribunal on payment of 10% duty then the recovery is automatically stayed and the Department cannot retain the amount forcibly recovered from the bank account of the appellant during the pendency of the appeal before the Tribunal. Since the appeal of the appellant is pending and during the pendency of the said appeal, the Department cannot withhold the amount recovered from the appellant without serving the copy of the Order-in-Appeal. The retention of the money recovered from his bank account is without authority of law and is hit by Article 265 of the Constitution of India read with Section 35F of the Central Excise Act 1944. The impugned order rejecting the refund of the amount recovered from the bank account of the appellant is not sustainable in law more so when the appeal of the appellant is already pending for disposal before the CESTAT, Bangalore - Appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against denial of CENVAT credit and imposition of penalty; Recovery of amount by the Department without serving copy of Order-in-Appeal; Denial of refund claim under Section 11B of Central Excise Act 1944.

Analysis:
The appellant was engaged in manufacturing PSC Mono Block Sleepers and RMC, supplying to Indian Railways. The Department objected to CENVAT credit availed on capital goods, leading to a demand of duty and penalty. The appeal against this was partially allowed by the Commissioner of Central Excise, reducing the penalty. However, the appellant claimed they were unaware of the Order-in-Appeal due to non-receipt and subsequent recovery of a substantial amount without proper communication. They approached the Deputy Commissioner for the order copy, but recovery was made before providing it. The appellant filed an appeal before CESTAT after receiving the order copy, following which a refund claim was filed. The Assistant Commissioner rejected the refund claim citing Section 11B, leading to the present appeal.

The appellant argued that recovery without serving the Order-in-Appeal was unauthorized and violated their right to appeal. They contended that the pre-deposit under Section 35F stayed the demand automatically, making the recovery illegal. Refund denial under Section 11B was challenged as the claim was based on the automatic stay provision. Legal precedents supporting their arguments were cited, emphasizing the Department's obligation to refund excess pre-deposit. The Department, however, supported the impugned order's findings.

The Tribunal found the recovery unauthorized, emphasizing the appellant's delayed knowledge of the Order-in-Appeal and subsequent recovery without proper communication. It noted the mandatory pre-deposit under Section 35F, stating that recovery during appeal pendency was impermissible. The Circular requiring pre-deposit was highlighted, indicating the Department's duty to refund excess amounts paid. Refund denial under Section 11B was deemed unsustainable, given the circumstances. Citing a Chennai CESTAT decision, the Tribunal ruled in favor of the appellant, setting aside the impugned order and allowing the appeal with consequential relief.

In conclusion, the Tribunal held that the impugned order denying refund was legally unsound, especially with the pending appeal. The recovery without serving the Order-in-Appeal and withholding the amount during appeal contravened statutory rights. The Tribunal's decision was based on legal provisions, precedents, and the Department's obligation to refund excess pre-deposit amounts, ultimately allowing the appellant's appeal.