2024 (10) TMI 141 - AT - Central Excise

Revenue must follow Section 11A procedures before rejecting refund claims for excess self-credit taken

M/s Modern Papers Versus Commissioner of Central Excise And Service Tax, Chandigarh-II

CESTAT Chandigarh allowed the appeal where Revenue rejected a refund claim of Rs.34,86,309/- for July 2011 without following prescribed procedures under ... Self-credit of differential amount - rejection of refund without following the procedure laid down under the N/N. 19/2008 - It is the case of the appellants that they have availed 100% credit in view of the decision of the Hon’ble High Court of Jammu & Kashmir in the case of M/S RECKITT BENCKISER VERSUS UNION OF INDIA AND OTHERS [2010 (12) TMI 237 - JAMMU AND KASHMIR HIGH COURT] - HELD THAT:- In cases where the appellant has taken self-credit in a wrongful manner, the inadmissible credit needs to be recovered, if not reversed by the assessee within the specified period as intimated by the authorities, as if it is a recovery of duty of excise erroneously refunded. In the instant case, it is not on record if the authorities have given any notice to the appellants to reverse the credit and whether any Show Cause Notice to recover the excess credit availed in terms of Section 11A of Central Excise Act, 1944. It is found that it is not legally correct for the Department to reject the same as a refund to be granted. Hon’ble Apex Court in the case of CHANDRA KISHORE JHA VERSUS MAHAVIR PRASAD & ORS. [1999 (9) TMI 948 - SUPREME COURT] held that 'It is a well settled salutary principle that if a Statute provides for a thing to be done in a particular manner, then it has to be done in that manner and in no other manner.' If the law ordains the authority to do a particular thing in a particular manner, the authorities should do the thing only in the prescribed manner and not otherwise. In the instant case, Revenue having not followed the procedure prescribed for recovery of the alleged excess self-credit cannot reject the same. The appellants have already availed the self-credit and therefore, such an order rejecting the credit has no effect and cannot be implemented. Thus, the order becomes superfluous - the alleged wrongful credit has not been held to be so in a proper manner. Therefore, the rejection of cash refund of Rs.34,86,309/- for the month of July 2011 is not legally correct. Out of the claim of refund of Rs.34, 86,309/-, the appellants shall be entitled for refund of an amount, as calculated in terms of N/N. 19/2008 - Appeal allowed. Issues Involved:1. Entitlement to self-credit of differential amount.2. Rejection of refund claim of Rs. 34,86,309/-.3. Appropriation of Rs. 1,06,59,994/- and interest from refund amount.Issue-Wise Detailed Analysis:1. Entitlement to Self-Credit of Differential Amount:The appellants, a manufacturer of insecticides and pesticides, availed the benefit of exemption under Notification No. 56/2002-CE. This notification was amended by Notification Nos. 19/2008-CE and 34/2008-CE, restricting the credit to 34%. The appellants recalculated the refund due based on the High Court's judgment in the Reckit Benckiser case, taking self-credit of Rs. 1,06,59,994/-. The Deputy Commissioner rejected this self-credit, stating that the appellants were not petitioners in the Reckit Benckiser case. The Tribunal noted that the procedure under Para 2C(g) of Notification No. 19/2008 was not followed by the Department, which requires recovery of excess credit through a specified process. The Tribunal held that the Department's rejection of the self-credit without following the proper procedure was not legally correct.2. Rejection of Refund Claim of Rs. 34,86,309/-:The appellants' refund claim of Rs. 34,86,309/- was rejected by the Deputy Commissioner, asserting that the duty payment utilizing inadmissible credit was in contravention of Rule 8 of the Central Excise Rules, 2002. The Tribunal found that the alleged wrongful credit had not been properly adjudicated. Therefore, the rejection of the cash refund was deemed not legally correct. However, in light of the Supreme Court's decision, the appellants were entitled to a refund restricted to 34% as per Notification No. 19/2008.3. Appropriation of Rs. 1,06,59,994/- and Interest from Refund Amount:The authorities appropriated Rs. 1,06,59,994/- and interest from the refund sanctioned to the appellants without any confirmed demand or issuance of a Show Cause Notice under Section 11A of the Central Excise Act, 1944. The Tribunal held that such appropriation lacked a legal basis, referencing case law that demands outstanding against an assessee cannot be appropriated from the admissible refund amount without following due process.Conclusion:The Tribunal allowed both appeals:- For Appeal No. E/52756/2014, the appellants were entitled to a refund amount as calculated in terms of Notification No. 19/2008.- For Appeal No. E/52758/2014, the appropriation of Rs. 1,06,59,994/- and interest was deemed without legal basis.(Order pronounced in the open court on 26/09/2024)