TaxTMI 
TaxTMI 
TaxTMI 
2025 (9) TMI 123
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.... 2.1. The amended Notification provided an option for fixation of special value addition rate, representing the actual value addition, if as per the manufacturer the value addition rates prescribed in the notification are on a lower side. Accordingly, the Appellant started filing applications for determination of special rates before the Jurisdictional Commissioner for each of its units within the due dates stipulated in the amended notification. 2.2. Simultaneously, the amended Notification was challenged by the Appellant vide Writ Petition (WP No. 3070/2008) before the Hon'ble Gauhati High Court and the same was struck down by Ld. Single Judge of the Hon'ble Gauhati High Court vide its order dated 24.06.2009. The said order was challenged by the department, wherein the Division Bench of the Guwahati High Court vide interim order dated 12.12.2012 directed for releasing 50% of the disputed amount, subject to furnishing of solvent surety to the satisfaction of the jurisdiction officer. Finally, the order of the Ld. Single Judge was also affirmed by the Division Bench of the Hon'ble Gauhati High Court. 2.3. In view of the aforesaid interim order of the Hon'ble High Court, the Appe....
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.... mentioned below. TABLE-B Unit Period Order date Spl. VAR Fixed Total amt. refundable Refund sanctioned @34% Refund receivable after fixation of Spl. VAR Unit A 201011 29.12.2021 76.81% (Refund allowed @ 59.03%, as per claim) 1,56,21,251/- 89,97,502/- 66,23,749/- 201314 06.12.2021 43.36% 2,03,51,022/- 1,59,57,904/- 43,93,118/- 201415 06.12.2021 43.39% 2,46,60,483/- 1,93,23,725/- 53,36,758/- 201516 06.12.2021 55.82% (Refund allowed @ 55.36%, as per claim) 3,28,98,230/- 2,02,04,838/- 1,26,93,392/- 201617 06.12.2021 56.34% 3,28,33,378/- 1,98,14,249/- 1,30,19,129/- 201718 06.12.2021 58.29% 78,21,159/- 46,08,052/- 32,13,107/- 5,09,60,442/- Unit B 200809 28.12.2021 64.57% 7,63,99,390/- 4,02,28,885/- 3,61,70,505/- 201011 28.12.2021 67.57% 1,67,67,191/- 84,36,947/- 84,36,947/- 4,45,00,749/- Unit C 201112 30.12.2021 81.80% 7,68,86,216/- 7,68,86,216/- 2,42,39,814/- Unit D 200809 29.12.2021 48.92% 4,40,04,656/- 3,05,83,775/- 1,34,2....
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....equence of court's direction under Bond/ Surety. Thus, the appellant was contractually bound to pay back the inadmissible amount. It is a settled principle of law that where an amount becomes liable for recovery, the same is required to be paid back with appropriate interest. (c) As the amount finally found admissible was based on appellant's own submissions before the officers, the appellant must have been aware all along since the judgment of the Hon'ble Supreme Court regarding the tentative amount which would be admissible to them. Thus, the appellant has faulted by not refunding the amounts back immediately after the Supreme Court's judgment. 2.10. Thus, vide the impugned order, the Ld. Commissioner (Appeals) has upheld the demand of interest upon the Appellant. Aggrieved against the confirmation of the demands of interest on the entire amount of provisional refund sanctioned, the appellant has filed these appeals. 3. The Ld. Counsel appearing on behalf of the appellant submits that prior to introduction of Section 11AA of the Central Excise Act, 1944, w.e.f. 08.04.2011, Section 11AB was the governing provision for levy of interest; in terms of Section 11AB of the Act, inte....
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....s been held that the appellant is contractually bound to pay back the inadmissible provisional amount; further, that once the refund is recoverable, the interest is automatically payable. In respect of the above, the appellant submits that any recovery of the refund or interest can only take under the provisions of the Central Excise Act.; a bond cannot go beyond the mandate of the Excise Act to recover what is not provided for in law. It is their argument that even if the Department intended to invoke the bond for recovery of the amount of provisional refund or interest therein, it is prerequisite on the part of the department to first raise the demand thereof under appropriate provision of law before invoking the bond; no amount can be recovered under the bond executed, which is de hors the provisions/ mandate of the Excise Act. In this regard, the appellant placed reliance on the judgment of the Tribunal at Mumbai in the case of Sterile Optical Technologies Ltd. v. Commissioner of C.Ex., Aurangabad [2011 (270) E.L.T. 266 (Tri. - Mumbai)], wherein it was held as under: "A conjoint reading of condition No. 2 and condition No. 14(3) of the B-17 Bond would indicate that an amount ....
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.... interest on recovery of the said interim refund. Hence, it is submitted that the impugned orders, directing for recovery of interest on provisional refund sanctioned to the appellant are exfacie erroneous and thus, liable to be set aside. 3.5. The appellant further raised the ground that the demand for recovery of interest has been charged upon the appellant arbitrarily, without following due process of law i.e. without issuance of show cause notice under Section 11A of the Central Excise Act. It is a settled position of law that no proceeding for recovery of demand can be initiated, circumventing the recovery mechanism as laid down in the concerned statute inasmuch as the same tantamount to violation of principles of natural justice. Reliance herein is placed on the following decisions: Ranbaxy Laboratories v. Commissioner of Central Excise, Indore [2017 (7) TMI 323-CESTAT New Delhi]; Narsingh Ispat Ltd. v. Union of India & Ors. [2022 (3) TMI 1047-Jharkhand High Court] 3.5.1. Furthermore, it is also their submission on this score that it is a settled principle of law that issuance of Show Cause Notice is a pre-requisite before recovery of any demand; reliance herein is pl....
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.... 2016-17 29.09.2016 06.12.2021 1,98,14,249/- 5 2017-18 26.09.2017 06.12.2021 46,08,052/- 4 Unit B 2008-09 30.09.2009 28.12.2021 3,61,70,505/- 12 2010-11 29.09.2010 28.12.2021 83,30,244/- 11 Unit C 2011-12 28.09.2011 30.12.2021 2,42,39,814/- 10 Unit D 2008-09 30.09.2008 29.12.2021 1,34,20,881/- 13 23,49,11,056/- 3.6.1. Referring to the table above, the appellant stressed that it becomes clear that the appellant had duly applied for special rate fixation for each year as per the statutory timelines; however, it was only on account of the stay of such amended notification and consequent orders of the Hon'ble High Court, striking down the said notification, that the value addition applications were also kept pending. It is submitted that had the value additions applications rates been decided promptly, there would not have been any question of granting interim refund per se. Thus, it is submitted by the appellant that they were rightly eligible for refund amounting Rs. 23,49,11,056/- which is much prior to the payment of provisional 50% refund by the Department; therefore no interest is leviable on such....
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.... is not applicable in the present case as there is no substantive provision for charging interest w.e.f. 08.04.2011, it is submitted that the appellant's contention is without merit, as Section 11A (1) of the Central Excise Act, 1944 provides for recovery of duty not levied, not paid, short-levied, short-paid, or erroneously refunded, in cases not involving fraud, suppression, or wilful misstatement. Under Section 11A(1)(a), the Central Excise Officer may, within the prescribed time, issue notice to the person chargeable with such duty, including in cases of erroneous refund. Section 11A(1)(b) further stipulates that such person may, before service of notice, pay the duty along with interest under Section 11AA; Determination of duty of excise where duty not levied, not paid, short-levied, short-paid, or erroneously refunded administrated by Section 11A(10). (ii) Read together, these provisions make it clear that Section 11AA applies not only to non/short-levy, non-/short-payment, but also to erroneous refunds. The term "duty "in Section 11AA, by its linkage to Section 11A, is an all encompassing expression covering non-levy, short-levy, non-payment, short-payment, and erroneo....
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....anctioned consequent to the Orders passed by the Hon'ble High Court and Supreme Court cannot be called as 'erroneous refund'. 6.1. We find that in view of the interim order of the Hon'ble High Court, the appellant was sanctioned 50% of the disputed amount as provisional refunds. We also find that subsequently, the issue with respect to amendment of area based exemption notification was decided by the Hon'ble Apex Court vide the common order in the matter of Union of India v. VVF Ltd. & Another [2020-VIL-14-SC-CE], wherein the validity of Notification No. 20/2008 was upheld and it was clarified that the pending refund applications would be decided in terms of the amended notification, which stands reinstated by the Hon'ble Supreme Court. 6.2. Pursuant to the Hon'ble Supreme Court's order (supra), the applicant preferred a writ petition before the Hon'ble Gauhati High Court seeking stay on recovery of the refund granted, pending adjudication of special value addition rates. The Hon'ble Gauhati High Court vide its order dated 20.10.2020 directed the department to decide on pending special value addition rate applications and not to proceed with recovery. Accordingly, Ld. Principal C....
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.... without issuance of any Show Cause Notice under Section 11A of the Central Excise Act. In this regard, we agree with the submission of the appellant that issuance of Show Cause Notice is a pre-requisite before recovery of any demand. In support of our view, we refer to the decision of the Hon'ble Apex Court in the case of Dharampal Satyapal Ltd. v. Dy. Commissioner of Central Excise, Gauhati [2015 (320) ELT 3 (SC)]. The relevant observations of the Hon'ble Apex Court in the said judgement are as under: - "16. As a pure principle of law, we find substance and force in the aforesaid submission of Mr. Sorabjee. No doubt, the Department was seeking to recover the amount paid by virtue of Section 154 of the Act of 2003 which was enacted retrospectively and the constitutional validity of the said Section had already been upheld by this Court in R.C. Tobacco (supra) at the time of issuance of notice for recovery. Further, no doubt, the effect of the said amendment retrospectively was to take away the benefit which was granted earlier. However, the question is whether before passing such an order of recovery, whether it was necessary to comply with the requirement of show-cause notice? ....
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....t principle of natural justice are violated. To the same effect are the following judgments: (a) U.O.I. & Ors. v. Madhumilan Syntex Pvt. Ltd. & Anr. - (1988) 3 SCC 348 = 1988 (35) E.L.T. 349 (S.C.) (b) Morarji Goculdas B & W Co. Ltd. & Anr. v. U.O.I. & Ors. - (1995) Supp 3 SCC 588 = 1996 (83) E.L.T. 259 (S.C.) (c) Metal Forgings & Anr. v. U.O.I. & Ors. - (2003) 2 SCC 36 = 2002 (146) E.L.T. 241 (S.C.) (d) U.O.I. & Ors. v. Tata Yodogawa Ltd. & Anr. - 1988 (38) E.L.T. 739 (S.C.) = 1988 (19) ECR 569 (S.C.) 29. Therefore, we are inclined to hold that there was a requirement of issuance of show-cause notice by the Deputy Commissioner before passing the order of recovery, irrespective of the fact whether Section 11A of the Act is attracted in the instant case or not." 7.1. In this regard, it is also a settled position of law that no proceeding for recovery of demand can be initiated, circumventing the recovery mechanism as laid down in the concerned statute, as held in the following decisions: - (i) Ranbaxy Laboratories v. Commissioner of Central Excise, Indore [2017 (7) TMI 323-CESTAT New Delhi]; (ii) Narsingh Ispat Ltd. v. Union of India & Ors. [2022 (3) TMI 1047-J....
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....he assent of the President." Section 11AA introduced w.e.f. 08.04.2011 reads as under: "Section 11AA. Interest on delayed payment of duty.- (1) Notwithstanding anything contained in any judgment, decree, order or direction of the Appellate Tribunal or any court or in any other provision of this Act or the rules made thereunder, the person, who is liable to pay duty, shall, in addition to the duty, be liable to pay interest at the rate specified in subsection (2), whether such payment is made voluntarily or after determination of the amount of duty under section 11A. (2) Interest, at such rate not below ten per cent. and not exceeding thirty-six per cent. per annum, as the Central Government may, by notification in the Official Gazette, fix, shall be paid in terms of section 11A after the due date by the person liable to pay duty and such interest shall be calculated from the date on which such duty becomes due up to the date of actual payment of the amount due. (3) Notwithstanding anything contained in subsection (1), no interest shall be payable where - (a) the duty becomes payable consequent to the issue of an order, instruction or direction by the Board under sec....
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....in respect of the refund, if any, paid 'erroneously'. 9. Further, from the impugned order, we observe that the Ld. Commissioner (Appeals) has observed that provisional refund paid to the Appellant was as per the directions of the Hon'ble Supreme Court and Hon'ble High Court, against submission of surety bond and hence, the appellant is contractually bound to pay back the inadmissible refund provisionally paid to them. In this regard, we find that effectively, the appellant had received net excess refund of Rs. 50,96,571/- only (i.e. Rs. 24,00,07,627 - Rs. 23,49,11,056/-), which was re-paid by them vide challan 21.03.2023. Thus, it is observed that even as per the surety bond executed by them, the appellant has paid the net excess refund amount received by them. Regarding, recovery of interest on this excess amount repaid by the appellant, it is a fact that there is no provision in the Surety Bond executed by the appellant to recover interest on the excess refund repaid by them. Further, we find that any recovery of the refund or interest can only take under the provisions of the Central Excise Act. A surety bond cannot go beyond the mandate of the Excise Act to recover what is not....