2025 (5) TMI 1007 - AT - Central Excise

Refund rejection overturned for coconut oil duty deposits after classification circular withdrawal under Central Excise Tariff Act 1985

CESTAT Chennai allowed the appeal regarding refund rejection for amounts paid as duty/deposits from March 2005 to mid-2014 on coconut oil packed in ... Rejection of refunds of amounts paid as duty (or deposits equivalent to duty) during the period from March 2005 to mid-2014 - Classification of 'Coconut Oil' packed in containers of less than 200 ml - to be classified under Heading 1503 (Fixed Vegetable Oils) or Chapter 33 (Cosmetics and Toiletries) of the Central Excise Tariff Act, 1985? - HELD THAT:- There is no denial of the facts that what was paid, may be as a ‘deposit’ by the appellant, was an amount equal to the duty element, the appellant itself had classified the ‘Coconut Oil’ pack of less than 200 ml. under Chapter 33 [and not under Chapter 15], there was a serious issue regarding the very classification of ‘Coconut Oil’ below 200 ml. package as the Board had issued Circulars [145, 890, etc.], there were Hon’ble High Court [of Bombay, Kerala & Madras] rulings in support of tax payers and the jurisdictional High Court’s order in W.P dated 29.04.2014 coupled with the dismissal of SLP/Civil Appeal by the Apex Court resulting in the very withdrawal of Circular No. 890/10/2009-CX supra by the Government. The Commissioner (Appeals) has relied heavily on this Circular and therefore, when the same is withdrawn, then the same becomes non-est and any order passed following the said Circular also becomes non-est. Conclusion - There is no justification in rejecting the refund claims since primarily the ground on which rejection was made is itself not there anymore in the statue book. The impugned order set aside - appeal allowed. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered by the Tribunal are:(a) Whether the classification of 'Coconut Oil' packed in containers of less than 200 ml should be under Heading 1503 (Fixed Vegetable Oils) or Chapter 33 (Cosmetics and Toiletries) of the Central Excise Tariff Act, 1985, in light of conflicting Circulars and judicial pronouncements.(b) Whether the appellant was entitled to refunds of amounts paid as duty (or deposits equivalent to duty) during the period from March 2005 to mid-2014, given the ongoing classification dispute and the pendency of adjudication proceedings.(c) Whether the rejection of refund claims by the Adjudicating Authority and the Commissioner (Appeals) was justified, particularly on grounds of time-bar and merit, and in view of the binding judicial precedents and withdrawal of Circular No. 890/10/2009-CX.(d) Whether the Revenue's insistence on duty payment despite interim stay orders from the High Court and the failure to follow binding judicial rulings constituted a miscarriage of justice.2. ISSUE-WISE DETAILED ANALYSISIssue (a): Classification of Coconut Oil (less than 200 ml packs)The classification dispute arises from conflicting Circulars issued by the Central Board of Excise and Customs (CBEC). Initially, Circular No. 145/56/95-CX dated 31.08.1995 mandated classification of Coconut Oil under Heading 1503 (Fixed Vegetable Oils) unless indicated for hair application, in which case Chapter 33 applied. This circular was disturbed by changes in the statute in 2005.Subsequently, Circular No. 890/10/2009-CX dated 03.06.2009 narrowed the scope, instructing that Coconut Oil packed in containers up to 200 ml be treated as hair oil and classified under Chapter 33, withdrawing the earlier circular. However, Circular No. 1007/14/2015-CX dated 12.10.2015 withdrew Circular 890/10/2009-CX following Supreme Court judgments which effectively revived Circular No. 145/56/1995-CX.The appellant relied on judicial precedents including the Madras High Court's order dated 29.04.2014 and Tribunal's Final Order No.638/2008, which held that Coconut Oil packed in small containers was classifiable under Heading 1503. The High Court had also declared Circular No. 890/10/2009-CX arbitrary and unconstitutional. The Revenue's continued insistence on classification under Chapter 33 and demand for duty was contrary to these rulings.The Tribunal recognized that the classification issue was unresolved for a long period, with conflicting Circulars and judicial decisions. The Board's withdrawal of Circular No. 890/10/2009-CX and the binding High Court rulings favored classification under Heading 1503 for small packs.Issue (b): Entitlement to Refund of Deposited DutyThe appellant had deposited amounts equivalent to excise duty under compulsion during investigations and issuance of Show Cause Notices (SCNs) for the disputed period (March 2005 to January 2010 and beyond). The deposits were made despite interim stay orders granted by the Madras High Court and other judicial pronouncements favorable to the appellant's classification stance. The appellant contended these payments were made under protest and should be treated as deposits, not as payments of duty.The appellant filed refund claims for amounts paid during various periods between 2009 and 2014. The Adjudicating Authority rejected these claims primarily on the ground that they were time-barred and on merit, holding that the appellant had not challenged the self-assessment and thus could not now question classification and claim refunds. The Commissioner (Appeals) upheld these rejections, relying heavily on Circular No. 890/10/2009-CX.The appellant argued that the rejection was improper as the refund claims were filed within reasonable time after the judicial clarifications, and that the Revenue failed to issue SCNs or provide opportunity for hearing on the delay or merits of the claims. The appellant also pointed to the binding judicial orders and the withdrawal of Circular No. 890/10/2009-CX, which undermined the Revenue's reliance on that circular.Issue (c): Validity of Rejection of Refund ClaimsThe Tribunal noted that the Adjudicating Authority and Commissioner (Appeals) had relied on Circular No. 890/10/2009-CX to reject refund claims. However, this circular was subsequently withdrawn due to Supreme Court decisions which restored the earlier classification regime. The Tribunal held that reliance on a withdrawn circular rendered the rejection orders non-est and unjustified.The Tribunal further observed that the appellant's deposits were made under protest during a period of genuine classification dispute and pending judicial decisions, and thus the amounts should not be treated as forfeited duty. The failure of the Revenue to initiate adjudication or issue SCNs in a timely manner deprived the appellant of a fair opportunity to contest the claims.In applying the law to facts, the Tribunal emphasized that the appellant's classification was supported by binding judicial precedents and that the Revenue's insistence on duty payment despite interim stay orders and judicial rulings was improper. The Tribunal rejected the Revenue's contention that the appellant's failure to challenge self-assessment barred refund claims, noting the exceptional circumstances of the classification dispute and the interim stay orders.Issue (d): Conduct of Revenue and Miscarriage of JusticeThe appellant contended that the Revenue's conduct, including investigations, issuance of SCNs despite stay orders, and refusal to follow binding judicial rulings, amounted to intimidation and caused miscarriage of justice. The Tribunal acknowledged these contentions, noting that the Revenue's actions were inconsistent with judicial directions and statutory provisions.The Tribunal held that the Revenue's failure to follow the High Court's order dated 29.04.2014 and the Tribunal's earlier ruling resulted in serious injustice to the appellant. The Revenue's reliance on a circular declared unconstitutional and later withdrawn further compounded the injustice.The Tribunal underscored the principle that revenue officers must act in accordance with judicial pronouncements and cannot ignore binding rulings to the detriment of assessees.3. SIGNIFICANT HOLDINGSThe Tribunal held:'There is no denial of the facts that what was paid, may be as a 'deposit' by the appellant, was an amount equal to the duty element, the appellant itself had classified the 'Coconut Oil' pack of less than 200 ml. under Chapter 33 [and not under Chapter 15], there was a serious issue regarding the very classification of 'Coconut Oil' below 200 ml. package as the Board had issued Circulars [145, 890, etc.], there were Hon'ble High Court [of Bombay, Kerala & Madras] rulings in support of tax payers and the jurisdictional High Court's order in W.P dated 29.04.2014 coupled with the dismissal of SLP/Civil Appeal by the Apex Court resulting in the very withdrawal of Circular No. 890/10/2009-CX supra by the Government. The Commissioner (Appeals) has relied heavily on this Circular and therefore, when the same is withdrawn, then the same becomes non-est and any order passed following the said Circular also becomes non-est.'The Tribunal concluded that the rejection of refund claims was unjustified and set aside the impugned orders, allowing the appeals with consequential benefits as per law.Core principles established include:Refund claims filed in the context of genuine classification disputes and under judicial stay orders cannot be summarily rejected as time-barred without considering the peculiar facts.Revenue Circulars withdrawn or declared unconstitutional cannot be the basis for denying refunds or upholding adverse orders.Deposits made under protest pending adjudication of disputed duty do not constitute payment of duty and are refundable if classification is subsequently held in favor of the assessee.Revenue authorities are bound to follow binding judicial rulings and cannot ignore them to the detriment of the taxpayer.The final determination was that the appellant was entitled to refunds of the amounts deposited as duty under protest, and the rejection of such claims by the adjudicating and appellate authorities was set aside.