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2022 (11) TMI 1161 - HC - CustomsRecovery of demand when appeal has been restored and pending - appropriation / adjustment of refund with demand - Doctrine of merger - recovery of excess duty - Section 129E of the Customs Act - HELD THAT - The proceedings in the said Appeal No.C/85678/15 were the subject matter in dispute in Writ Petition No.475 of 2020 which was decided on 9th November 2022 - Since the Appeal No.C/85678/15 of petitioner has been restored to the CESTAT, no recovery in excess of 7.5% of the duty in dispute can be made by respondents. The three impugned orders dated 17th February 2021 and the two orders dated 31st December 2021 insofar as they appropriate the refunds of petitioner against the demand imposed by Order-in-Original dated 28th November 2014 is set aside - respondents are directed to refund Rs.67,64,925/- and Rs.60,58,966/-, together with applicable interest, within eight weeks from the date of uploading of the order. Petition disposed off.
Issues Involved:
1. Entitlement to refund of customs duty. 2. Suo-moto adjustment of refunds against pending demands. 3. Applicability of Section 129E of the Customs Act, 1962. 4. Doctrine of merger and its applicability. 5. Rectification application and its implications. Detailed Analysis: 1. Entitlement to Refund of Customs Duty: The petitioner applied for refunds via multiple applications, which were allowed on merits by the respondents. However, the refunds were not disbursed but instead adjusted against a pre-existing demand confirmed by an Order-in-Original dated 28th November 2014. The total amounts involved were Rs.67,64,925/- and Rs.60,58,966/-. 2. Suo-moto Adjustment of Refunds Against Pending Demands: The respondents adjusted the refunds against a confirmed duty demand of Rs.5,23,16,494/- with interest and penalty imposed by the Order-in-Original dated 28th November 2014. This adjustment was challenged by the petitioner, who argued that the demand had already been stayed due to compliance with the pre-deposit requirement under Section 129E of the Customs Act, 1962. 3. Applicability of Section 129E of the Customs Act, 1962: The petitioner had already paid Rs.4,78,67,608/- during investigation proceedings, which exceeded the 7.5% pre-deposit requirement for filing an appeal with the CESTAT. According to the CBEC Circular No.984/8/2014-CX, no recovery beyond the 7.5% deposit was permissible until the appeal was disposed of by the Tribunal. The court noted that the balance demand was automatically stayed, and thus, the respondents' adjustment of the refunds was inappropriate. 4. Doctrine of Merger and Its Applicability: The petitioner had initially filed an appeal with the Apex Court but later withdrew it to file a rectification application with the CESTAT. The respondents argued that the doctrine of merger applied, meaning the CESTAT's order merged with the Supreme Court's order, making the rectification application non-maintainable. However, the court held that the doctrine of merger did not apply since the Supreme Court had not passed any order on merits and had only allowed the withdrawal of the appeal. 5. Rectification Application and Its Implications: The rectification application filed by the petitioner was initially dismissed by the CESTAT on the grounds that the petitioner had exhausted its remedy by approaching the Supreme Court. However, the High Court noted that the CESTAT had allowed similar rectification applications for other parties based on the same grounds and thus directed the CESTAT to reconsider the petitioner's rectification application. Conclusion: The High Court quashed and set aside the impugned orders dated 17th February 2021 and 31st December 2021, which had appropriated the refunds against the demand imposed by the Order-in-Original dated 28th November 2014. The court directed the respondents to refund the amounts of Rs.67,64,925/- and Rs.60,58,966/-, together with applicable interest, within eight weeks. The court emphasized that no recovery in excess of the 7.5% pre-deposit could be made while the appeal was pending before the CESTAT. Both petitions were disposed of with no order as to costs.
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