2014 (12) TMI 74 - AT - Central Excise

Appeal Dismissed, Upholding Refund Recovery Order: TI 17(4) Classification, Restitution, Interim Orders

The Tribunal dismissed the appeal, upholding the impugned order for recovery of the refund along with interest. The decision reinforced the principles of ... Recovery of refund claim allowed erroneously - Hon’ble Apex Court [2003 (2) TMI 210 - SUPREME COURT OF INDIA] allowed the Revenue’s appeals and restored the order of the Asst. Collector dated 8-6-1982 approving the classification of shells and slides under TI 17(4) - Held that:- Plainly the assessee is obliged to make restitution. The Revenue honoured the Tribunal’s order and made the refund. Upon reversal by this Court of the Tribunal’s order, the assessee was bound in law to restitute the amounts of such refund to the Revenue - If refund was granted in pursuance of the order of the Tribunal and the said order of the Tribunal was subsequently reversed by an order of the Supreme Court, that itself would require the assessee to make restitution of the sum that the Revenue had refunded to it pursuant to the Tribunal’s order. The refund was sanctioned to the appellant pursuant to the Tribunal’s order. The said order of the Tribunal was reversed by the Hon’ble Apex Court order [2003 (2) TMI 210 - SUPREME COURT OF INDIA]. On such reversal, the appellant was required to suo motu restitute the sum to the Revenue which they did not do. Therefore, show cause notice was issued (within a period of six months from the date of the Apex Court’s order) for recovery of the refund wrongly granted and the demand was confirmed along with interest. There is absolutely nothing wrong or illegal in confirmation of such demand as such an order only seeks to enforce the Apex Court’s decision. Therefore, the impugned order is sustainable in law and accordingly we uphold the same - Decided against the assessee. Issues Involved:1. Validity of the refund of Rs. 58,71,708/- sanctioned to the appellant.2. Classification of shells and slides under TI 17(4) of the Central Excise Tariff.3. Applicability of the principle of restitution.4. Finality of the orders passed by lower authorities.5. Impact of the Hon'ble Apex Court's decision on the refund claim.Detailed Analysis:1. Validity of the Refund:The appellant argued that the refund of Rs. 58,71,708/- was validly made based on judgments from the Hon'ble High Court of Delhi and the Hon'ble Apex Court, which held that outer shells alone do not constitute boxes. The subsequent judgment by the Hon'ble Apex Court, which held that shells and slides together constitute a box, did not affect their entitlement to the refund as they cleared shells and slides separately. However, the Tribunal found that the refund was sanctioned based on an interim order from CEGAT, which was later overturned by the Hon'ble Apex Court. Therefore, the refund was not validly sanctioned and had to be restituted.2. Classification of Shells and Slides:The core issue was whether shells and slides, when cleared together, constitute a box under TI 17(4) of the Central Excise Tariff. The Hon'ble Apex Court in its order dated 6-2-2003/13-3-2003 held that shells and slides together constitute a box and are classifiable under TI 17(4). The Tribunal noted that the shells and slides were either captively consumed or cleared to other units, implying they were used together, thus constituting a box. The appellant's argument that they cleared shells and slides separately was found untenable.3. Principle of Restitution:The Tribunal upheld the principle of restitution, which mandates that a party must return any benefit received if the basis for that benefit is later overturned. The Hon'ble Apex Court in Woodcraft Products Ltd. and Kerala State Electricity Board v. MRF Ltd. established that upon reversal of an order, the party must restitute the amount received. Since the refund was granted based on a CEGAT order, which was later overturned by the Hon'ble Apex Court, the appellant was required to return the refund amount.4. Finality of Lower Authorities' Orders:The appellant contended that the orders dated 16-8-2001 and 2-1-2003, which allowed the refund and dropped the demand for erroneous refund, attained finality. However, the Tribunal clarified that these orders were interim as the classification issue was under consideration by the Hon'ble Apex Court. Therefore, the finality of these orders was subject to the Hon'ble Apex Court's decision, which ultimately overturned the basis for the refund.5. Impact of the Hon'ble Apex Court's Decision:The Tribunal emphasized that the Hon'ble Apex Court's decision on 6-2-2003/13-3-2003, which restored the order of the Assistant Collector classifying shells and slides under TI 17(4), was the final ruling on the matter. This decision necessitated the recovery of the refund granted based on the earlier CEGAT order. The Tribunal found that the show cause notice issued for recovery of the refund within six months of the Apex Court's decision was timely and legally sustainable.Conclusion:The Tribunal dismissed the appeal, upholding the impugned order for recovery of the refund along with interest. The decision reinforced the principles of classification under TI 17(4), the requirement for restitution upon reversal of a judicial order, and the non-finality of interim orders pending a higher court's ruling.