2016 (11) TMI 1288 - HC - Central Excise

CESTAT rules in favor of Dr. Reddy's Labs, rejects recovery demand for rebate

The Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench, Bangalore, allowed the appeal by M/s. Dr. Reddy's Laboratories Ltd., setting ... Rebate claim - jurisdiction under Section 35-G of Central Excise Act - recovery of erroneously sanctioned refund claim - Held that: - The impugned recovery order passed by the Commissioner of Customs and Central Excise, Hyderabad – IV confirming the recovery of erroneously sanctioned rebate was only a consequential order of recovery based on the orders which were challenged before the Delhi High Court. When the Delhi High Court set aside the consequential demands raised for recovery of the rebate of excise duty, the question of again issuing demand for recovery of ₹ 21,02,12,794/- and ₹ 64,66,041/- does not arise and issue of such demand is in utter disregard of the orders passed by the Delhi High Court. As demands were issued for recovery of allegedly erroneously sanctioned rebate, the CESTAT, South Zonal Bench, Bangalore set aside the same since the Delhi High Court set aside the consequential demands also and held that the issue of such demand is arbitrary and illegal. Even otherwise, if consequential recovery is permitted, on any ground, it amounts to reviewing the order of Delhi High Court. When the order of Delhi High Court attained finality, this Court while exercising the jurisdiction under Section 35-G of Central Excise Act, has no option except to confirm the order under challenge. On an overall consideration of the entire material available on record, we find no ground to set aside the order passed by the CESTAT, South Zonal Bench, Bangalore as the Delhi High Court set aside the order passed for recovery of rebate and consequential demands, while restoring the Orders-in-Original No.462/2011- REBATE and No.3/2012-REBATE, dated 30.09.2011 and 13.01.2012. Therefore, we find no error in the order passed by the CESTAT, South Zonal Bench, Bangalore warranting interference by this Court - appeal dismissed - decided against Revenue. Issues:Appeal under Section 35(G) of the Central Excise Act against the order of Customs, Excise and Service Tax Appellate Tribunal, Rebate claims filed by M/s. Dr. Reddy's Laboratories Ltd., Determination of rebate with reference to Central Excise Valuation Rules, Recovery of erroneously sanctioned rebate, Delhi High Court's judgment impact on the recovery order, Challenge to the order passed by CESTAT, South Zonal Bench, Bangalore.Analysis:The Commissioner of Customs appealed against the order of the Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench, Bangalore, regarding rebate claims by M/s. Dr. Reddy's Laboratories Ltd. The Tribunal allowed the appeal by Dr. Reddy's Laboratories, setting aside the Commissioner's order. Dr. Reddy's Laboratories had filed rebate claims for exports under the DEPB scheme and for P or P Medicaments. The Deputy Commissioner accepted the claims, leading to the issuance of rebate cheques. However, the Commissioner (Appeals) later allowed the department's appeals, resulting in show-cause notices for recovery of rebate amounts.Subsequently, the Adjudicating Commissioner confirmed the recovery orders, prompting Dr. Reddy's Laboratories to file revision applications. The Joint Secretary modified the orders partially, leading to a Writ Petition in the Delhi High Court. The High Court set aside the revision authority's orders, restoring the rebate amounts sanctioned earlier. The CESTAT, Bangalore, in light of the Delhi High Court's decision, set aside the recovery demand raised by the Commissioner.The appeal challenged the CESTAT's order on the determination of rebate with reference to Central Excise Valuation Rules. During the hearing, the appellant's counsel referred to the Delhi High Court's judgment, which was pivotal in setting aside the Department of Revenue's orders. The CESTAT, based on the Delhi High Court's decision, restored the original rebate order. The recovery order by the Commissioner was considered consequential and was set aside by the CESTAT.The CESTAT's decision was upheld as the Delhi High Court had set aside the recovery demands, rendering the recovery orders illegal. The CESTAT found no grounds for interference, and the appeal was dismissed. The recovery demand was deemed arbitrary and illegal, and any consequential recovery was seen as reviewing the Delhi High Court's order, which had attained finality.In conclusion, the CESTAT's decision was upheld, and the recovery demand for rebate was declared illegal in light of the Delhi High Court's judgment. The appeal was dismissed, with no costs imposed.