2023 (12) TMI 167 - AT - Central Excise

Tribunal Orders Review of Cash Refund for Duty-Free Bidding Discrepancies; Case Sent Back for Reassessment.

The Tribunal allowed the appeal by remanding the matter to the Adjudicating Authority for re-determination of the cash refund amount under Section 11B of ... Quantum of cash refund - Refund of wrongly paid Central Excise duty on the goods supplied - how much cash refund is to be given to the appellant? - HELD THAT:- Since different amounts have been shown Central Excise duty paid in cash both by the department as well as by the appellant - it will be appropriate to remand the matter back to the Adjudicating Authority to re-determine the amount of cash after taking into consideration the submissions which have been made by the appellant with regard to claim of cash payment of Central Excise duty amounting to Rs. 76,57,238/- and decide the matter after due verification of facts of cash payment of Central Excise duty and accordingly decide the refund claim again after taking into consideration the claim of the appellant. Appeal allowed by way of remand. ISSUES PRESENTED AND CONSIDERED 1. Whether refund under Section 11B of the Central Excise Act, 1944 for supplies treated as deemed exports (per EXIM Policy para 8.2(f)) should be sanctioned in cash to the extent duty was paid from the Public Ledger Account (PLA) and credited to the Cenvat account otherwise. 2. How the quantum of cash refund is to be determined where records reflect differing figures for duty paid from cash (PLA) versus duty debited to the Cenvat account. 3. Whether the adjudicating authority's detailed sanctioning of a higher cash refund without verifying payments from PLA versus Cenvat balance is legally sustainable. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Legal framework governing nature of refund (cash v. Cenvat credit) Legal framework: Refund claims under Section 11B of the Central Excise Act, 1944 are examined against applicable notifications (here, exemption Notification No. 12/2012-CE dated 17.03.2012) and classification of supplies as deemed exports (EXIM Policy para 8.2(f)). Procedure for payment of central excise duty is governed by Central Excise Rules, 2002 (including Rule 8 on consolidation of duty payments), and by established practice distinguishing payments from PLA (cash) and debits to the Cenvat account (input credit). Precedent treatment: No prior judicial precedent was relied upon or overruled in the judgment; the Court applied statutory scheme and administrative practice. Interpretation and reasoning: The Tribunal accepted the uncontested principle that cash refund entitlement corresponds to the amount actually paid from the PLA while clearing exempted goods; amounts that were discharged by debiting the Cenvat account should be refunded by way of credit to the Cenvat account. The distinction was treated as a matter of substance - source of payment determines mode of refund - consistent with refund mechanics under Section 11B. Ratio vs. Obiter: Ratio - cash refund equals amounts paid from PLA; Cenvat debits warrant Cenvat credit. This is a central legal conclusion applied to the facts. Conclusions: The Tribunal confirmed the legal proposition that the quantum of cash refund must be tied to actual PLA payments; amounts reflected as debited to the Cenvat account cannot properly be sanctioned as cash refund. Issue 2 - Determination of quantum of cash refund when records conflict Legal framework: Determination of refund quantum requires factual verification of ledger entries and invoices, reconciliation under Rule 8 (payment consolidation), and application of the refund notification and Section 11B methodology. Precedent treatment: No express precedents were invoked; the Tribunal relied on the adjudicating authority's record and on plain import of accounting practice to resolve divergences. Interpretation and reasoning: The Tribunal recognized that Rule 8 consolidation makes tracing payment against a particular invoice potentially complex. Where departmental and claimant computations differ, the Tribunal held that the appropriate course is to ascertain the actual source of payment (PLA versus Cenvat) through verification rather than adopt a conclusory ratio or an unverified computation. The Tribunal endorsed the approach of reconstructing payments by reference to general practice (department's contention that credit is normally used first and PLA thereafter) only insofar as it requires factual corroboration. Given material conflict in figures (department: cash paid Rs. 54,15,406; appellant: cash paid Rs. 76,57,238; appellant earlier computed Rs. 18,88,445 for cash based on a method), the Tribunal concluded that the record did not permit final adjudication on quantum without fresh verification. Ratio vs. Obiter: Ratio - where ledger/accounting entries produce different figures, remand for factual verification is required before determining cash vs. Cenvat entitlement. Obiter - reliance on 'general practice' as a fallback is acceptable only as a guide, not as substitute for verification. Conclusions: The Tribunal directed remand to the adjudicating authority to re-determine the cash payment quantum after verifying submissions and underlying records, thereby holding that disputes on payment-mode facts cannot be resolved by formula or assumption alone. Issue 3 - Validity of adjudicating authority's methodology and correctness of Commissioner (Appeals) intervention Legal framework: Appellate scrutiny under the excise appellate machinery may examine whether the adjudicating authority applied correct legal principles and performed requisite fact-finding; Commissioner (Appeals) must ensure sanctioned refunds conform to statutory scheme and verified facts. Precedent treatment: No case law was cited; the Tribunal assessed correctness on record-based and principle-based grounds. Interpretation and reasoning: The Commissioner (Appeals) found error in the adjudicating authority's sanction of Rs. 54,15,406 as cash refund without adequately tracing the payments to PLA. The Commissioner accepted a particular calculation (appellant's method yielding Rs. 18,88,445) as having 'strong force,' but the Tribunal noted continued discrepancy between figures produced by department and appellant and considered that definitive determination required remand. The Tribunal did not reverse on merits but remitted for fact-finding, implying that the Commissioner (Appeals) was correct in finding the adjudicating authority's method unsafe but that a final quantification could not be fixed at the appellate stage without verification. Ratio vs. Obiter: Ratio - appellate or revisional authority must not sanction a final refund quantum without ensuring factual verification of payment records; if facts are contested and material, remand is appropriate. Obiter - commentary on the persuasive force of the appellant's calculation does not bind final outcome. Conclusions: The Tribunal allowed the appeal by way of remand, concluding that the adjudicating authority should re-determine the amount of cash refund after verifying the appellant's claim of cash payments (claimed Rs. 76,57,238) and relevant records; until such verification, neither the adjudicating authority's sanction nor the Commissioner (Appeals)'s provisional adoption of a particular calculation was sustained as final. Cross-references and Practical Implications 1. The core principle that cash refund corresponds to PLA payments and Cenvat debits correspond to Cenvat credit is applied to guide the remand (see Issue 1 and Issue 2). 2. Where Rule 8 consolidation or accounting practice obscures invoice-level payment tracing, the appropriate remedy is fact-finding and ledger reconciliation by the adjudicating authority rather than adopting assumed ratios (see Issue 2 and Issue 3). 3. The Tribunal's direction to remand is dispositive for the dispute on quantum; the legal standards articulated are binding on the adjudicating authority in re-determination (ratio on remand procedure and payment-source principle).