2025 (3) TMI 501 - HC - Central Excise

Department Ordered to Refund Rs. 2.57 Crores with Interest; Filing Appeal Doesn't Justify Delay Without Stay Order

Amul Crank Case (P) Ltd., Versus The Commissioner of Central Excise & Service Tax, Jamshedpur.

The HC ruled that the respondent-Department's withholding of the refund amount of Rs. 2,57,38,894.67, despite the CESTAT setting aside the ... Withholding of refund alongwith interest despite the order of CESTAT - non-implementation of refund order - principles of unjust enrichment - HELD THAT:- The petitioner duly responded to the said show cause notice contending therein that the proposal for rejection of refund is highly arbitrary, inasmuch as, the credit was reversed with protest at the instance of the Department and consequent upon setting aside of the order of the Commissioner i.e., the Order-in-Original, by the learned tribunal; the petitioner-Company only wanted restoration of the said position. In response to the reply to the show cause notice, vide Annexure-6 i.e., letter dated 14/15.09.2022, the Assistant Commissioner, without adjudicating the issue, and without considering the reply to the show cause, only intimated the petitioner that the Department has filed an appeal before the High Court challenging the said Order-in-Appeal. To this letter, the petitioner also replied that in the absence of any stay order, implementation of the order of the learned Tribunal by way of giving refund cannot be delayed on any pretext. However, only on the aforesaid pretext, the refund has not been made. Admittedly, the show cause notice dated 11.08.2022 (Annexure-5) was duly replied by the petitioner, however, without adjudicating the show cause notice, the respondent-Department just delayed the matter of refund and forced the petitioner-company to knock the door of this Court. Accordingly, non-refund of the amount which was reversed by the petitioner on protest is unjust enrichment and is wholly arbitrary and also without jurisdiction. Conclusion - i) Compliance with a Tribunal's order is mandatory unless stayed by a higher authority. Procedural delays or pending appeals do not justify non-compliance. ii) The respondent-Department is directed to refund alongwith interest. Application allowed. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered by the Court were: Whether the respondent-Department was justified in withholding the refund amount of Rs. 2,57,38,894.67 along with interest, despite the order of the Customs Excise and Service Tax Appellate Tribunal (CESTAT) setting aside the Order-in-Original. Whether the mere filing of an appeal by the Department against the Tribunal's order justified the non-implementation of the refund order. Whether the actions of the respondent-Department constituted unjust enrichment and were arbitrary, lacking jurisdiction.ISSUE-WISE DETAILED ANALYSIS1. Justification for Withholding the RefundRelevant legal framework and precedents: The legal framework involves the CENVAT Credit Rules, 2004, which govern the credit reversal and refund processes. The Tribunal's order, which set aside the Order-in-Original, was a crucial precedent mandating the refund.Court's interpretation and reasoning: The Court interpreted that the Tribunal's order clearly entitled the petitioner to a refund, as the original order demanding the reversal of credit was set aside. The Court emphasized that the Department's delay in processing the refund was unjustifiable.Key evidence and findings: The Tribunal's order dated 08.04.2022, which allowed the appeal with consequential relief, was pivotal. The Department's failure to act on the refund application post this order was a significant finding.Application of law to facts: The Court applied the principle that an order by a competent Tribunal must be implemented unless stayed by a higher authority. The absence of a stay order meant the refund should have been processed.Treatment of competing arguments: The Department's argument of pending appeal was dismissed as insufficient to delay the refund. The Court noted that procedural delays without a stay order do not negate the obligation to comply with the Tribunal's order.Conclusions: The Court concluded that the Department's actions were arbitrary and amounted to unjust enrichment, as they withheld funds rightfully due to the petitioner.2. Impact of Filing an Appeal on Refund ProcessRelevant legal framework and precedents: The principle that filing an appeal does not operate as a stay on the execution of the order appealed against unless expressly ordered by the appellate authority.Court's interpretation and reasoning: The Court reasoned that the mere filing of an appeal does not suspend the operation of the Tribunal's order. The Department's reliance on the pending appeal was therefore misplaced.Key evidence and findings: The show cause notice issued post-Tribunal order and the Department's communication citing the appeal as a reason for non-refund were examined.Application of law to facts: The Court applied the legal principle that without a stay, the Tribunal's order remains operative and enforceable.Treatment of competing arguments: The Department's argument for delaying the refund due to the pending appeal was rejected. The Court underscored that procedural actions without substantive orders do not justify non-compliance.Conclusions: The Court concluded that the Department's actions were without jurisdiction and arbitrary, as they failed to refund the amount despite the absence of a stay order.SIGNIFICANT HOLDINGSPreserve verbatim quotes of crucial legal reasoning: 'The law is no more res integra that mere filing of any application before any higher adjudicating authority will not absolve the concerned person to obey the order which is already in existence.'Core principles established: The Court established that compliance with a Tribunal's order is mandatory unless stayed by a higher authority. Procedural delays or pending appeals do not justify non-compliance.Final determinations on each issue: The Court directed the respondent-Department to refund the amount of Rs. 2,57,38,894.67 along with interest as a consequence of the Tribunal's order. The Court mandated completion of this exercise within six weeks, failing which a cost of Rs. 50,000 would be imposed on the responsible respondent.