2020 (4) TMI 802 - AT - Central Excise

Tribunal rules in favor of EOU in cost recovery charges dispute, orders refund of excess amount.

M/s. Sun Art Exporter Versus Commissioner of Central Goods and Service Tax, Jodhpur (Rajasthan).

The Tribunal ruled in favor of the appellant, a 100% EOU, in a case concerning the calculation, applicability, and refund of cost recovery charges and MOT ... 100% EOU - Demand of Differential Cost Recovery Charges paid - Claim of refund of excess MOT charges paid - The case of the appellant is that they have paid both the Merchant Overtime Charges and also cost recovery charges on sharing basis till the time of debonding, when application was made on 08.12.2014. Prior to this, vide their application dated 01.04.2014, they filed option with the appropriate officer on 01.04.2014 that they shall be paying only MOT charges. HELD THAT:- The Commissioner (Appeals) have erred in holding that the appellant have not raised the issue initially. Admittedly, from the facts it is evident that such issue was never raised by the appellant earlier and it was raised for the first time on 28.03.2014. As regards the allegation of short recovery of ‘cost recovery charges’, admittedly such charges (short paid) amounting to ₹ 71,25,382/- have been paid under protest and after sometime the appellant have applied for refund of the same. Thus, the finding of the Commissioner is factually wrong. The impugned order is set aside and appeal is allowed, so far as it has confirmed the levy of cost of recovery charges. Such cost recovery charges of ₹ 38,51,558/-, the Assistant Commissioner is directed to refund the above amount alongwith interest as per Rules, within a period of thirty days from the date of receipt of the order. - appeal allowed - decided in favor of appellant. Issues:1. Calculation of differential cost recovery charges based on pay and allowances.2. Applicability of cost recovery charges and Merchant Overtime Charges (MOT).3. Interpretation of Board Circular dated 07.04.2003.4. Legal validity of the imposition of cost recovery charges.5. Admissibility of refund claim for overpaid charges.Analysis:1. Calculation of differential cost recovery charges based on pay and allowances:The appellant, a 100% EOU, was required to pay cost recovery charges and MOT for supervision of packing and other related activities. The issue arose when it was found that the appellant had paid cost recovery charges based on outdated pay and allowances rates. The Assistant Commissioner calculated a differential amount of &8377; 71,25,382/-, which the appellant paid under protest. However, the Commissioner (Appeals) reduced this amount to &8377; 38,51,558/-, leading to a refund claim for the excess amount paid.2. Applicability of cost recovery charges and Merchant Overtime Charges (MOT):The appellant contended that they had opted to pay only MOT charges from a certain date, as per a Board Circular. The authorities argued that since the appellant had availed customs officers' services during their EOU period, they were liable to pay the cost recovery charges. The issue of whether the appellant should have raised objections earlier was also raised during the proceedings.3. Interpretation of Board Circular dated 07.04.2003:The Board Circular dated 07.04.2003 provided options for EOU units to pay either cost recovery charges or MOT charges for customs-related services. The appellant claimed to have opted for MOT charges only from a specific date, which was contested by the authorities. The Tribunal analyzed the circular's provisions and its implications on the appellant's liabilities.4. Legal validity of the imposition of cost recovery charges:The appellant cited legal precedents, including rulings from the Delhi and Madras High Courts, to challenge the imposition of cost recovery charges. The Tribunal examined these precedents to determine the legality of charging cost recovery fees in the context of the appellant's situation.5. Admissibility of refund claim for overpaid charges:The Tribunal considered the appellant's refund claim for the excess amount paid towards cost recovery charges. Relying on legal interpretations and precedents, including decisions from the Madras High Court and the Tribunal itself, the Tribunal found in favor of the appellant. The impugned order was set aside, and the Assistant Commissioner was directed to refund the excess amount of &8377; 38,51,558/- with interest within thirty days.This detailed analysis of the judgment highlights the key issues addressed by the Tribunal regarding the calculation, applicability, interpretation, legality, and refund of cost recovery charges and MOT payments in the context of the appellant's case.