2025 (3) TMI 577 - AT - Service Tax

CESTAT allows appeal by remand in refund case involving CENVAT credit reversal under Rule 6(3A)(c)(iii)

Standard Chartered Bank Versus Commissioner of CGST & Central Excise, Mumbai

Standard Chartered Bank Versus Commissioner of CGST & Central Excise, Mumbai - TMI 1. ISSUES PRESENTED and CONSIDEREDThe primary issue considered was whether the amount paid 'under protest' by the appellants, in reversal of CENVAT credit related to alleged exempted services, is refundable. This involved examining whether the payment made under protest could be refunded following the dropping of demands in the adjudication process.2. ISSUE-WISE DETAILED ANALYSISRelevant Legal Framework and PrecedentsThe legal framework involved the application of the Finance Act, 1994, and the Central Excise Act, 1944, specifically Section 11B concerning refund claims. The precedents considered included various judgments from the Tribunal and High Courts, which established principles regarding refunds of amounts paid under protest and the non-applicability of unjust enrichment in such cases.Court's Interpretation and ReasoningThe Tribunal interpreted that amounts paid under protest during the pendency of adjudication or investigation are not considered as payments towards duty or tax but as deposits. Therefore, the principles of unjust enrichment do not apply to such refunds. The Tribunal emphasized that the refund claim should be examined on its merits, considering the finality of the adjudication process where the demands were dropped.Key Evidence and FindingsThe Tribunal noted that the appellants had paid the CENVAT credit amount under protest and had communicated this to the department. The adjudication process had concluded with the dropping of demands, and no appeal was filed by the department, indicating that the issue had attained finality. The Tribunal found that the original authority and the first appellate authority had erred in rejecting the refund claim as premature without considering the merits of the case.Application of Law to FactsThe Tribunal applied the provisions of Section 11B of the Central Excise Act, 1944, which allow for refund claims without the limitation period when the duty or tax is paid under protest. The Tribunal found that the appellants had fulfilled the requirements for a refund claim, including the non-applicability of unjust enrichment, as the amount was carried as 'receivables' in their balance sheet.Treatment of Competing ArgumentsThe Tribunal addressed the arguments from the Revenue, which supported the rejection of the refund claim as premature. However, the Tribunal found these arguments unconvincing, given the legal provisions and precedents supporting the appellants' position. The Tribunal emphasized the need for the original authority to examine the refund claim on its merits, considering the finality of the adjudication process.ConclusionsThe Tribunal concluded that the impugned order lacked legal sanctity and was liable to be set aside. The Tribunal remanded the case to the original authority for a fresh decision on the merits of the refund claim, ensuring compliance with legal provisions and proper examination of the material presented by the appellants.3. SIGNIFICANT HOLDINGSPreserve Verbatim Quotes of Crucial Legal ReasoningThe Tribunal stated, 'The principles of unjust enrichment would not apply if a refund is claimed for refund of this amount,' emphasizing the non-applicability of unjust enrichment to amounts deposited under protest.Core Principles EstablishedThe Tribunal established that amounts paid under protest during adjudication or investigation are considered deposits, not payments towards duty or tax. Consequently, the principles of unjust enrichment do not apply to such refunds. The Tribunal also highlighted the importance of examining refund claims on their merits, considering the finality of adjudication processes.Final Determinations on Each IssueThe Tribunal set aside the impugned order and remanded the case to the original authority for a fresh decision on the merits of the refund claim. The Tribunal directed the original authority to provide a reasonable opportunity for a personal hearing and to consider all material submitted by the appellants in their decision-making process.