Appeals allowed, refund order set aside. Excise duty recovery prohibited. Activity not manufacturing.

The appeals were allowed, setting aside the refund order granted by the High Court of Rajasthan to the respondents. However, the Excise Department was prohibited from recovering excise duty from the respondents following a Supreme Court decision establishing that the activity in question did not amount to manufacturing. The Court emphasized that the duty had been paid after adjudication and upheld by the Tribunal, with no further appeals pursued by the respondents, leading to finality in the proceedings.

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Issues:
Challenging quashed excise duty and penalty judgments of High Court of Rajasthan.

Analysis:
The case involved two appeals challenging the judgments of the High Court of Rajasthan that had quashed the excise duty and penalty paid by the respondents. The issue arose from Show Cause Notices issued to the respondents regarding cutting marble blocks into slabs and tiles, alleging it amounted to manufacturing activity without payment of excise duty. The Order-in-Original confirmed the demand, upheld by the Tribunal, and the respondents did not further appeal, leading to the recovery of excise duty and penalty. However, a similar issue was decided differently by the Supreme Court in a previous case, stating that such activity did not amount to manufacturing. Subsequently, the respondents filed writ petitions seeking a refund, which the High Court granted, directing the Union of India to refund the duty, interest, and penalty.

The main argument presented by the Union of India was that the writ petitions for refund were not maintainable as the proceedings had reached finality, and the amount had been recovered. The Union contended that a subsequent judgment by the Supreme Court altering the legal position was not a valid ground for the respondents to claim a refund under Article 226 of the Constitution. The Court agreed with this submission, emphasizing that the duty was paid after adjudication, upheld by the Tribunal, and no further appeals were pursued by the respondents, leading to finality in the proceedings. Therefore, the direction in the impugned judgments to refund the duty, interest, and penalty was set aside. However, the Court clarified that following its judgment establishing that the activity did not amount to manufacture, the Excise Department was not entitled to recover any excise duty from the respondents from the date of the Supreme Court's decision.

In conclusion, the appeals were allowed based on the directions provided, setting aside the refund order but preventing the Excise Department from recovering excise duty following the Supreme Court's clarification on the legal position.

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