2025 (11) TMI 676 - HC - Central Excise

Order set aside and matter remanded for fresh decision on rebate parity, interest nexus, s.142(4) CGST, ss.136/130 issues

HC set aside the impugned order dated 17 Jan 2022 and remanded the matter to the 2nd Respondent for fresh decision on the revision application. The court ... Entitlement to a rebate u/r 18 CER 2002 read with N/N. 19/2004-CE(NT) dated 6 September 2024 - finished products upon which BED and NCCD was paid by the Petitioner - such payments concern the export of the finished products outside the India - non-payment of interest on the allegedly delayed NCCD payments - payment of the demanded amount in cash, under protest or by signing the same as disputed as being one of the reasons for rejection of rebate claim - impact of the provisions in Section 142(4) of the CGST Act 2017, Section 136 of the Finance (No. 2) Act, 2001 or Section 130(1) of the Finance (No. 2) Act, 2019 a lapse under Section 142(4) of the CGST Act on the Petitioner’s rebate claim - impact of the settlement of the dispute under the SVLDRS on the Petitioner’s rebate claim - principles of unjust enrichment. Whether the Petitioner was entitled to a rebate under Rule 18 CER 2002 read with Notification No. 19/2004-CE(NT) dated 6 September 2024 in respect of the finished products upon which BED and NCCD was paid by the Petitioner (initially by utilising CENVAT credit, and later in cash), in so far as such payments concern the export of the finished products outside the India? - HELD THAT:- This issue of parity, though squarely raised by the Petitioner, does not appear to have been considered or dealt with in the impugned common order. Any decision on such an issue would involve examination of the factual aspect of whether parity would indeed be a casualty if the revenue’s version were allowed to prevail. Non-payment of interest on the allegedly delayed NCCD payments - HELD THAT:- The issue of nexus between non-payment of interest on the alleged delayed payment of NCCD and rebate under Rule 18 of CER, 2002, read with Notification dated 06 September 2022, was the crucial issue before the 2nd Respondent, and this issue has not been addressed or decided by the 2nd Respondent in the impugned common order dated 17 January 2022. Payment of the demanded amount of Rs. 22,31,16,229/- in cash, “under protest” or by signing the same as “disputed” as being one of the reasons for rejection of rebate claim - HELD THAT:- The impugned common order states, as a matter of fact, that the amount was paid in cash “under protest”. However, there is nothing in the impugned common order which suggests the payment of this amount “under protest” was one of the grounds for rejecting the Petitioner’s rebate claim - As it is well settled, statutory orders made by statutory authorities must stand or fall based upon the reasons set out therein. Such reasons cannot ordinarily be supplemented in the form of Affidavits or contentions advanced across the Bar. If this was indeed one of the reasons for the denial of the rebate, then the same should have been put to the Petitioner so that the Petitioner could have dealt with the same. The 2nd Respondent has not explained why a payment under protest disqualifies the party from claiming a rebate, if such a rebate is legally otherwise admissible. If amounts are not paid under protest, the Revenue objects to their refund on the grounds that such amounts were voluntarily paid without any objection. Now that the amount was paid under protest, the rebate is contested on the said ground without explaining why such a payment disqualifies an assessee from receiving the rebate, if it is otherwise due by law. Impact of the provisions in Section 142(4) of the CGST Act 2017, Section 136 of the Finance (No. 2) Act, 2001 or Section 130(1) of the Finance (No. 2) Act, 2019 a lapse under Section 142(4) of the CGST Act on the Petitioner’s rebate claim - HELD THAT:- Even this is cursorily referred to in the impugned common order. Most of the shades of the rival contentions on these issues are not even considered in the impugned common order. Impact of the settlement of the dispute under the SVLDRS on the Petitioner’s rebate claim - HELD THAT:- This required an examination of the scope of the settlement proceedings and the final settlement reached. Secondly, this required examining the nexus between the settlement reached and the claim for rebate, which the Petitioner claimed was made independently under Rule 18 of CER 2002 r/w the Notification dated 06 September 2024. The Petitioner had contended that the settlement under the SVLDRS had no nexus with the rebate claim, which was made only in respect of finished products exported outside India. All these aspects have not been considered in the impugned common order dated 17 January 2022. The arguments or reasons concerning overlap and unjust enrichment cannot, at least prima facie, be accepted in these proceedings, mainly because they are not reflected in the impugned common order dated 17 January 2022. No opportunity was also provided to the Petitioner to address these aspects, if they were intended to form the basis for denying the rebate claim - However, the fact remains that none of these aspects was considered when making the impugned common order dated 17 January 2022. These aspects cannot be considered for the first time in the present proceedings inter alia because they involve issues of factual determination as well. Considering all the circumstances, justice would be best served if the impugned common order dated 17 January 2022 is set aside and the matter is remanded to the 2nd Respondent for a fresh reconsideration of the Petitioner’s Revision Application, which was disposed of by the impugned common order dated 17 January 2022 (SIC 19/01/2022) [at Exhibit A pages 73 to 80 of the paper book in this Petition], by thoroughly addressing all the above crucial issues. The impugned common order dated 17 January 2022 made by the 2nd Respondent set aside - matter remanded to the 2nd Respondent for deciding the Petitioner’s Revision Application afresh in accordance with law and on its own merits. ISSUES PRESENTED AND CONSIDERED 1. Whether a rebate under Rule 18, Central Excise Rules, 2002 read with the relevant notification is admissible for NCCD paid (initially by utilising CENVAT credit of BED and later in cash) on final products exported outside India. 2. Whether interest is payable on alleged delayed payment of NCCD for the period March 2016 to June 2017 and, if so, whether non-payment of such interest can lawfully be a ground to deny a rebate claim under Rule 18. 3. Whether the proviso to Section 142(4) of the CGST Act, 2017, Section 136 of the Finance Act, 2001, or Section 130(1) of the Finance (No. 2) Act, 2019 operate to bar or lapse the petitioner's rebate claim. 4. Effect of settlement under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDRS) on the petitioner's separate rebate claim - whether settlement precludes or extinguishes the rebate right. 5. Legal significance of payment made 'under protest' (or 'disputed') towards demands - whether such payment disentitles a claimant from obtaining rebate legally otherwise due. 6. Whether parity between exports made under bond (duty not paid) and exports made on payment followed by rebate requires identical treatment for rebate/relief purposes. 7. Whether overlap/possible double relief and the doctrine of unjust enrichment (in light of subsequent adjudicatory findings) disentitles the petitioner to the rebate absent prior consideration and opportunity. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Entitlement to rebate under Rule 18 for NCCD paid (CENVAT-utilised then cash-paid) on exported final products Legal framework: Rule 18, Central Excise Rules, 2002 and Notification granting rebate for duties paid on goods exported; Section 136, Finance Act, 2001 as regards NCCD being collected pari passu with central excise regime; transitional treatment under GST regime affecting CENVAT registers and claims. Precedent treatment: No definitive single precedent resolves the particular interplay of CENVAT utilisation, subsequent cash payment and rebate under Rule 18 on these facts; prior decisions addressing rebates and cess/cess-like levies have been considered by the Court in context but not conclusively applied by the authority below. Interpretation and reasoning: The impugned order failed to advert to Rule 18 and the specific notification in reasoning; the Court identifies that the central question - whether duty/cess paid on export (even after initial CENVAT utilisation) entitles to rebate - was not examined. Nexus between legal entitlement to rebate for exported goods and manner/timing/source of payment of duty requires reasoned determination by the adjudicating authority. Ratio vs. Obiter: Ratio - the adjudicatory requirement that a claim under Rule 18 must be considered on its terms and reasoned findings recorded on entitlement. Obiter - observations on how parity and double-payment principles might bear on outcome are provisional. Conclusion: Rebate entitlement remains undecided on the record; remand required for the authority to apply Rule 18 and the notification, examine whether duty on exported goods was effectively discharged and whether rebate is admissible notwithstanding earlier CENVAT utilisation. Issue 2 - Liability to pay interest on delayed NCCD and its relevance to rebate Legal framework: Sectional scheme imposing NCCD; historical amendments introducing levy/interest provisions at specific times; applicable interest provisions under central enactments governing excise/cess collections as incorporated by Section 136. Precedent treatment: Coordinate and Supreme Court decisions (including Valecha, Navayuga) have been relied on to support the proposition that interest on delayed cess/cess-like levies may be exigible; the petitioner relied on contrary authorities to contend no interest payable for the period in question. Interpretation and reasoning: The Court was prima facie inclined that interest could be payable in light of binding precedents upholding interest liability on analogous levies. However, the Court emphasised that even if interest were payable, the impugned order did not explain how non-payment of interest forms a legally cognisable nexus to deny a statutory rebate under Rule 18 for exported goods. The nexus between interest liability and rebate admissibility was not articulated by the authority below. Ratio vs. Obiter: Ratio - interest liability may exist under applicable law and precedents; however, denial of rebate on ground of non-payment of interest without reasoned nexus is unsustainable. Obiter - detailed comparative analysis of precedents distinguishing interest applicability was left open. Conclusion: Interest may be payable as a matter of law, but non-payment of interest alone cannot be a valid reason to deny a rebate unless the authority records reasoned findings explaining the causal/legal link; remand necessary for fresh adjudication. Issue 3 - Applicability of proviso to Section 142(4) CGST, Section 136 Finance Act 2001, and Section 130(1) Finance (No.2) Act 2019 to bar or lapse the rebate claim Legal framework: Proviso to Section 142(4) CGST Act (lapse of claim in specified circumstances); Section 136 (applicability of central excise provisions to NCCD); Section 130(1) Finance (No.2) Act, 2019 (SVLDRS bar on reopening settled disputes/refunds in certain respects). Precedent treatment: Authorities have interpreted statutory bars/lapses in context; the decision below invoked these provisions cursorily without full analysis against the petitioner's specific rebate claim. Interpretation and reasoning: The Court found that the impugned order did not adequately analyze whether these statutory provisions were attracted to the petitioner's rebate claim, particularly where the rebate claim related to exports and where the petitioner separately availed of settlement under SVLDRS for other demands. The adjudicator must apply these provisions to the precise facts and explain whether lapse or bar operates. Ratio vs. Obiter: Ratio - the applicability of statutory bars must be expressly and reasonedly considered; Obiter - whether any particular provision in fact operates to bar the rebate remains open pending remand. Conclusion: The impugned order's invocation of these provisions is inadequate; the authority must reassess and record specific findings on their applicability to the rebate claim on remand. Issue 4 - Effect of SVLDRS settlement on separate rebate claim Legal framework: SVLDRS scheme terms granting immunity on settlement for specified dues, interest and penalty; interaction between settlement outcomes and independent statutory refund/rebate claims. Precedent treatment: Statutory settlements generally extinguish or bar claims covered by their terms; but coverage must be specifically ascertained - whether rebate claims relating to exports lie within the settlement's scope requires examination. Interpretation and reasoning: The Court observed that the impugned order did not examine the scope of the SVLDRS discharge versus the separate rebate claim; whether the SVLDRS discharged the particular rebate head or merely adjusted paid amounts requires factual and legal analysis. The Court directed the authority to examine nexus between settlement and rebate claim on remand. Ratio vs. Obiter: Ratio - settlement effects must be expressly determined against each distinct claim; Obiter - preliminary remarks that settlement may or may not preclude rebate. Conclusion: Remand required for a reasoned determination of whether the SVLDRS settlement precludes the rebate claim for exported goods. Issue 5 - Legal significance of payment 'under protest' for entitlement to rebate Legal framework: Principles that payments under protest preserve rights to contest demand; statutory provisions may sometimes treat voluntary payments differently; administrative fairness requires reasons for treating protest payments adversely. Precedent treatment: Authorities generally hold that payments made under protest do not preclude reimbursement where law supports refund; denial must be reasoned. Interpretation and reasoning: The Court held that the impugned order did not treat the protest-payment ground as a recorded reason for denial and, in any event, failed to explain why a payment under protest would disqualify a legally admissible rebate. Statutory orders must rest on the reasons articulated in the order; reasons cannot be supplemented by submissions across the Bar. Ratio vs. Obiter: Ratio - payment under protest does not ipso facto disentitle a claimant to rebate; Obiter - revenue may have different practical considerations but must record them formally. Conclusion: Denial premised on 'payment under protest' without reasoned explanation is unsustainable; authority must address and explain any such contention on remand. Issue 6 - Parity between export under bond and export with payment-and-rebate Legal framework: Two statutory modes for making exports duty-neutral - export under bond or pay-then-claim-rebate; principle of parity seeks similar fiscal consequences for either validly exercised option. Precedent treatment: Courts have recognised parity considerations in export relief regimes; factual application depends on statutory text and administrative practice. Interpretation and reasoning: The Court noted parity was argued but that the impugned order did not consider whether adopting one permissible mode (pay then rebate) could legitimately result in less favourable treatment than exporting under bond. The authority must examine parity and its factual implications. Ratio vs. Obiter: Ratio - parity is a relevant consideration to be adjudicated; Obiter - ultimate determination depends on statutory scheme and facts. Conclusion: Remand required for assessment of parity between modes of export and its bearing on rebate admissibility. Issue 7 - Overlap, double relief and unjust enrichment in light of subsequent adjudication Legal framework: Doctrine of unjust enrichment bars recovery where benefit has been passed on or where double recovery would result; adjudicatory findings of fact (e.g., that burden was passed to customers) can preclude restitution. Precedent treatment: Established principle that unjust enrichment prevents relief where taxpayer has not borne the economic burden; but such factual findings must be made in proper proceedings and parties given opportunity to meet them. Interpretation and reasoning: The Court found the CESTAT's later factual findings (recording pass-through to customers) post-dated the impugned order and were not available to the authority below; the impugned order did not consider overlap/unjust enrichment. These are fact-intensive and require the 2nd Respondent to consider them with opportunity to parties on remand. Ratio vs. Obiter: Ratio - unjust enrichment may bar rebate if established on facts; Obiter - reliance on later adjudication cannot be retroactively supplied to justify earlier reasons without hearing the parties. Conclusion: Overlap/unjust enrichment requires fresh fact-specific consideration; the authority must address it on remand, giving both parties opportunity to be heard. Final outcome ordered by the Court (procedural conclusion) The impugned order is set aside and the matter remanded to the 2nd Respondent to decide the revision afresh with reasoned findings on all issues identified above (entitlement to rebate under Rule 18, interest liability and its nexus to rebate, applicability of statutory bars including Section 142(4)/Section 130/Section 136, effect of SVLDRS, protest payment, parity, and unjust enrichment), after hearing both parties and within six months of production of an authenticated copy of this order. Observations made by the Court are prima facie and not to influence merits on remand.