2016 (4) TMI 781 - HC - Central Excise

Revenue's Arbitrary Rebate Appropriation Overruled, Emphasizes Respect for Tribunal Orders

Larsen and Toubro Limited Versus The Union of India & Others

The High Court held that the Revenue's appropriation of a rebate against a disputed amount, despite a Tribunal stay order, was arbitrary and against ... Refund - Adjustment of demand where stay was granted by the tribunal - Held that:- the Revenue could not have got over a binding stay order and by indirect or oblique process seek to recover the very sum and amount which it could not recover because of the prohibitory order of the Tribunal. Once no recovery of taxes pending Appeal was permissible and there was a stay to that extent, then, the Revenue could not have ignored this binding order of the Tribunal. - Once no recovery of taxes pending Appeal was permissible and there was a stay to that extent, then, the Revenue could not have ignored this binding order of the Tribunal. This is a novel way of taking over the adjudication and recommencing it when the earlier exercise ended completely in an order favourable to the Revenue but subject matter of Appeal. This is a clear case where the principle of matter being sub-judice would apply. The impugned order, passed in the present Petition and the observations cannot be utilized and to nullify, therefore, an order of stay which binds the Revenue. The powers if at all available could not have been exercised in this case and to subvert the order of stay and the Appeal which is pending, as a whole. This novel way of adjudication and mid-way during the pendency of legal proceedings before higher forum enables us to interfere in our writ jurisdiction. Therefore, the impugned order is quashed and set aside. Decided in favour of petitioner Issues:1. Appropriation of rebate against a demand stayed by the Appellate Tribunal.Analysis:The petitioner, a company engaged in exporting engineering equipment, claimed a rebate after paying excise duty. An order-in-original denied credit of service tax paid, leading to an appeal before the Tribunal. The Tribunal initially waived the pre-deposit condition and stayed tax recovery. However, the Respondent later sanctioned a rebate but appropriated it against the disputed amount, which the Petitioners challenged in a Writ Petition. The Respondent's action was deemed arbitrary and without jurisdiction by the Petitioners, as it rendered the Tribunal's stay order ineffective.The Respondent justified the appropriation, citing a judgment where a similar action was upheld. The High Court, after considering both parties' contentions and the previous judgment, disagreed with the Respondent's argument. The Court highlighted that the Revenue's power to adjust dues against rebates should not undermine a binding stay order issued by the Tribunal. The Court emphasized that the Revenue's indirect attempt to recover the disputed amount during the appeal process was impermissible and against the principles of natural justice.The Court further clarified that the judgment cited by the Respondent was not universally applicable and depended on the specific circumstances of each case. In this instance, where a binding stay order existed, the Revenue's attempt to recover the amount through indirect means was deemed unjust. The Court concluded that the impugned order was beyond the Assistant Commissioner's jurisdiction and quashed it. The Court directed the Tribunal to decide the appeal independently, without influence from the set-aside order, ensuring all contentions from both parties remained open for consideration.