2012 (8) TMI 897 - CGOVT - Central Excise

Government eases rebate claim recovery under Central Excise Act; revision application disposed of

The Government modified the Order-in-Appeal, allowing the recovery of erroneously sanctioned rebate claims under Section 11A without the requirement of ... Recover of duty u/s 11A - Denial of rebate claim - original authority initially sanctioned rebate claims - After sanction of rebate claims it had been observed by the applicant department that the respondents failed to submit copy of BRC (Bank Realization Certificate) w.r.t. exports in question - violation of Board’s Circular No. 354/70/97-CX., dated 13-11-1997 - Held that:- Section 11A of Central Excise Act, 1944 being an independent substantive provision, the appellate proceedings are not required to be initiated before issuing Show Cause Notice under Section 11A if there are grounds existing such as short levy, short recovery or erroneous refund, etc. Section 11A is an independent substantive provision and it is a complete code in itself for realisation of excise duty erroneously refunded. There are no preconditions attached for issuance of notice under Section 11A for recovery of amount erroneously refunded. Decision of Bombay High Court [2002 (2) TMI 132 - HIGH COURT OF JUDICATURE AT BOMBAY] has been upheld by Hon’ble Supreme Court reported as [2003 (4) TMI 558 - SUPREME COURT] holding that recovery of duty erroneously refunded is valid in law under Section 11A of Central Excise Act and there is no need of first filing the appeal against the order by which refund was erroneously sanctioned. - Decided in favour of Revenue. Issues Involved:1. Non-submission of Bank Realization Certificates (BRCs) within the stipulated period.2. Review of rebate claims sanctioned without following the provisions of Section 35E of the Central Excise Act, 1944.3. Applicability of Section 11A of the Central Excise Act, 1944 for recovery of erroneously sanctioned rebate claims.Detailed Analysis:Issue 1: Non-submission of Bank Realization Certificates (BRCs) within the stipulated periodThe respondent, M/s. Oswal Vinyl Industries Ltd., was issued nine show cause notices for the recovery of rebate claims sanctioned to them along with interest, as they failed to submit relevant BRCs within 160 days of the sanction of rebate claims as per C.B.E. & C. Circular No. 354/70/97-CX., dated 13-11-1997. The adjudicating authority confirmed a demand of Rs. 12,84,139/- along with interest and imposed a penalty of Rs. 9,000/- in all cases.Issue 2: Review of rebate claims sanctioned without following the provisions of Section 35E of the Central Excise Act, 1944The Commissioner (Appeals) set aside the Order-in-Original, directing the adjudicating authority to verify the BRCs produced by the applicant. The applicant department contested this, arguing that the Commissioner (Appeals) made a grave error by holding that the demand under Section 11A for recovery of erroneously sanctioned rebate claims cannot be raised without reviewing the relevant sanction orders under Section 35E. The department relied on the principle laid down by the Hon'ble High Court of Madras, which was deemed inapplicable in this context.Issue 3: Applicability of Section 11A of the Central Excise Act, 1944 for recovery of erroneously sanctioned rebate claimsThe applicant department argued that the rebate claims were erroneously sanctioned due to non-submission of BRCs and that the conditions laid down in the Circular were not met. They cited several case laws to support their stance that Section 11A is an independent substantive provision and does not require the initial order to be reviewed under Section 35E before issuing a show cause notice for recovery.Government Observations and Decision:- The respondent exported goods and filed claims of rebate, which were initially sanctioned by the original authority. However, the department observed that the respondent failed to submit the BRCs as required.- The Government noted that as per the Foreign Exchange Management Act, 1999, and related regulations, no rebate is admissible for exported goods against which foreign exchange for foreign remittance of sales proceeds has not been received.- The Government acknowledged the submission of a BRC dated 5-1-2011 for the goods exported, and directed the original authority to verify and accept the certificate if found in order.- The Government relied on the judgment of the Hon'ble High Court of Bombay in the case of M/s. Indian Dye Stuff Industries Ltd. v. UOI, which held that Section 11A is an independent substantive provision for the realization of excise duty erroneously refunded, and does not require the order to be reviewed under Section 35E before issuing a show cause notice.- Several other case laws were cited to reinforce that the erroneous refund/rebate sanctioned under an order can be recovered by invoking Section 11A without taking recourse to Section 35E.Conclusion:The Government modified the impugned Order-in-Appeal to the extent that the erroneous refund/rebate sanctioned can be recovered by invoking provisions of Section 11A of the Central Excise Act, 1944, without the need for reviewing the initial order under Section 35E. The revision application was disposed of accordingly.Order:The revision application is disposed of in terms of the above analysis and conclusions.