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2022 (2) TMI 732 - AT - Central ExciseRefund of amount of mandatory pre-deposit - amount of mandatory deposit at the time of filing appeal before CESTAT is 10% of duty and penalties or just 2.5% of duties and penalties added to the pre-deposit of 7.5% thereof already made before Commissioner (Appeals) - adjustment/set off the amount of refund against the arrears towards assessee - HELD THAT - The amount at the rate of 10% of duty and penalties as has to be deposited by the assessee for the appeals before CESTAT shall include the amount of pre-deposit before Commissioner (Appeals). Thus, the aforesaid 10% shall include the 7.5% of the amount of duty and / or penalty involved as was already deposited at the time of first appeal being preferred before Commissioner (Appeals). Hence, at the time of second appeal before Tribunal it shall only be 2.5% of the amount of duty or penalty that is to be deposited as amount of pre-deposit. However, the fact of the present case is that since the Circular of 2018 was not applicable at the time when the appeal before CESTAT was filed by the appellant in the year 2016-17 and as per the then prevalent provisions the appellant was supposed to deposit 10% of duty and penalty amount without including the amount of pre-deposit made by him before Commissioner (Appeals), that the appellant made a pre-deposit of 17.5%, accordingly. The said deposit qualifies to be called as pre-deposit under Section 35 F of Central Excise Act. The Larger Bench of this Tribunal also, at the relevant time, IN RE QUANTUM OF MANDATORY DEPOSIT 2017 (4) TMI 1222 - CESTAT NEW DELHI (LB) had held that under Section 35F of Central Excise Act, 1944 and under Section 129E of Customs Act, 1962 the assessee is required to make separate pre-deposit of 10% of amount of duty confirmed / penalty imposed for preferring a second appeal to Tribunal against the order of Commissioner (Appeals) - Keeping in view the said prevalent situation at the time when the appellant herein made a pre-deposit of 17.5%, his refund claim pursuant to setting aside of the demand/ penalty has to be sanctioned with the interest at the said deposit @ 17.5 % of duty and penalty deposited instead of sanctioning the refund of mere 10% of duty and penalty. As far as, first point of adjudication is concerned, the Adjudicating Authority below is held to have committed an error while not sanctioning the refund claim of entire amount of pre-deposit i.e. @ 17.5% of duty and /or penalty involved, that too, along with the interest. Recovery of sums due to the Government is dealt with under section 11 of Central Excise Act, 1944 - HELD THAT - The Order under challenge has been passed after the amendment in section 11. Hence, the post amendment provision is to be followed. Perusal of the said provision makes it clear that the adjudicating Authority has no power to order adjustment as there no more remains the specific provision authorizing him to adjust any sanctioned amount/ refund towards any other amount due to the Revenue. Section 11 existing as on date is rather in the nature of garnishee proceedings. The said provision does not contemplate adjustment of monies due to assessee towards the amount due to the Revenue. There exist no other provision in the Act which enables the Revenue to adjust the amounts due to them as against the amounts due by them to the assessee - The Department can proceed against the assessee to recover the amounts due to them under the provisions of the Act but the refund to which assessee is entitled has to be sanctioned and disbursed in his favour - the issue stands decided as against the Department and in favour of the assessee. The adjudicating authorities below have committed an error while ordering adjustment of the amount of ₹ 2,43,608/- from the sanctioned refund of ₹ 8,72,425/-. The amount disbursed of ₹ 6,64,357/- is therefore held to be a short disbursement - Appeal allowed.
Issues Involved:
1. Determination of the mandatory deposit amount at the time of filing an appeal before CESTAT. 2. Authority of the sanctioning authority to adjust/set off the amount of refund against the arrears towards the assessee. Issue-wise Detailed Analysis: Issue No.-(i): Determination of the mandatory deposit amount at the time of filing an appeal before CESTAT. The appellant had paid a pre-deposit of 10% of duty and penalty while filing an appeal before the CESTAT, in addition to the 7.5% already paid when filing an appeal before the Commissioner (Appeals). This was done in compliance with Circular No. 984/8/2014 dated 16.09.2014. However, this circular was superseded by Circular No. 1/5/2015 dated 05.07.2018, following the decision of the Delhi High Court in Santani Sales Organization, which clarified that only a total of 10% (including the 7.5% already deposited) needs to be deposited for appeals before CESTAT. The relevant portion of the judgment reads: "10% would not be in addition to and over and above 7.5% of pre-deposit made for the first appeal." Thus, only an additional 2.5% should have been required for the second appeal. However, since the appeal was filed before the 2018 amendment, the appellant had to deposit 17.5%. The Tribunal held that this deposit qualifies as a pre-deposit under Section 35F of the Central Excise Act. Therefore, the refund claim should include the entire 17.5% pre-deposit, not just 10%. Issue No.-(ii): Authority of the sanctioning authority to adjust/set off the amount of refund against the arrears towards the assessee. The recovery of sums due to the Government is governed by Section 11 of the Central Excise Act, 1944, which was amended in 2013. The pre-amendment section allowed for the deduction of amounts payable from any money owing to the person from whom such sums were recoverable. The post-amendment section, however, does not provide specific authority for such adjustments. Instead, it outlines garnishee proceedings, requiring other persons holding money for the assessee to pay the Government directly. The Tribunal noted that the adjudicating authority no longer has the power to adjust sanctioned refunds against other amounts due to the Revenue. This interpretation aligns with the Karnataka High Court's ruling in CCE, Bangalore vs. Stella Rubber Works (Unit-2), which held that without specific statutory authority, the Revenue cannot adjust amounts due to the assessee against amounts owed by the assessee to the Department. The Tribunal concluded that the adjudicating authorities erred in ordering the adjustment of ?2,43,608 from the sanctioned refund of ?8,72,425. The amount disbursed, ?6,64,357, was thus deemed a short disbursement. Conclusion: The Tribunal set aside the order under challenge, ruling in favor of the assessee on both issues. The appeal was allowed, and it was pronounced in open court on 16.02.2022.
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