Improper Procedure adopted by Manufacturer cannot be treated as ‘Illegal’: CESTAT allows Excise Duty Refund [Read Order]

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Mumbai bench has held that an improper procedure adopted by the manufacturer cannot be treated as illegal to deny refund of the Excise Duty.

The appellant, M/s. MIRC Electronics Ltd, are engaged in manufacture of Colour T.V., LCD, LED, Washing Machines, Split Air Conditioners and its spare parts and are availing Cenvat Credit as per Rule 3 of Cenvat Credit Rules, 2004. They are providing after sale service to their customers and clearing spares and components for the said service.

The department asked the appellants to furnish the details of such adjustments of duty payments on the spares and components consumed for providing free warranty services during the period August, 2011 to February, 2012 and financial year ending in March, 2013 to March, 2016 against the duty payments on the spares used for the repairs of their out warranty products.

Later, the demand of Central Excise duty alongwith interest and equal penalty and a fine of Rs. 5 Lakhs was also imposed in lieu of confiscation confirmed by the adjudicating authority. The appellants approached the Tribunal for relief.

Allowing the appeal, Mr. Ajay Sharma, Member (Judicial) held that it is not correct to say that there is any suppression on the part of the appellant as the procedure adopted by the appellant was well within the knowledge of the Revenue way back since the year 2011 and accordingly extended period of limitation is not invocable on the facts of the present case.

“Otherwise also it is settled legal principle as laid down by the Hon’ble Supreme Court in catena of decisions that something positive other than mere inaction or failure on the part of the manufacturer or producer or conscious or deliberate withholding of information when the manufacturer knew otherwise, is required before the assessee is saddled with any duty liability. Therefore, mere short payment of duty by the appellant is not sufficient in order to invoke the extended period,” the Tribunal said.

Concluding the appeal, the Tribunal held that “In the matter of South Indian Petrochem (supra) as cited by learned Chartered Accountant, a Co-ordinate Bench of the Tribunal had even permitted the adjustment of excess payment towards education cess against the short payment of Central Excise duty. In the case laws cited by learned Chartered Accountant I found that repeatedly it has been held by Tribunal that excess payment of duty can be adjusted against tax liability. The procedure adopted by the appellant may not be proper but that itself cannot make it illegal per se. This procedure admittedly has been discontinued by the appellant w.e.f May, 2016.”

Shri Bibek Halwai, Chartered Accountant appeared for the Appellant.

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