No Adjustment towards Interest and Penalty Sub Judice before Tribunal: CESTAT directs to Refund amount Adjusted with Interest [Read Order]

The New Delhi bench of Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ) presided by Mr. Anil Choudhary, Member (Judicial) has held that no adjustment towards interest and penalty sub judice before Tribunal and directs to refund amount adjusted with interest.

The adjudicating authority confirmed demand of Rs. 4,41,29,475/- against the appellant, M/s Total Energies Marketing India Pvt Ltd. the demand was ordered to be appropriated from the amount already deposited Rs. 5,52,79,359/-. The adjudicating authority also imposed interest and penalty of 15 lakhs under Rule 14 and 15 of CCR respectively. Against which assessee filed appeal before CESTAT and is pending before the Tribunal.

Later the appellant filed refund claim for the balance amount of Rs. 1,11,49,884/- or (5,52,79,359-4,41,29,475). This refund was adjusted an amount of Rs. 27,02,518/- towards interest on the Cenvat credit wrongly availed and also recovered the amount of penalty of Rs. 15 lakhs totalling Rs. 42,02,518/-, and granted the refund for the balance amount of Rs. 69,47,366/-. Aggrieved, appellant filed appeal Commissioner (Appeals), who rejected the appeal upholding the adjustment made by the court below. Hence, appeal filed before CESTAT.

The counsel for the appellant submitted that the amount adjusted from the refund towards penalty and interest is sub judice before the Tribunal and there is miscarriage of justice by adjusting sub judice amount of interest and penalty. Accordingly, appellant prays for allowing the appeal with consequential benefit.

The Tribunal observed that Section 11 of the Central Excise Act grants power to the Central Excise officers, being in the nature of special power of recovery, which in the nature of ‘garnishee proceedings’ but such power of adjustment cannot be exercised for demand of tax/interest/penalty which is sub judice.

The Tribunal has held that “the amount of interest and penalty are sub judice before this Tribunal and this fact was admittedly in the knowledge of the court below. Accordingly, I hold that the adjustment made from the amount refundable to the appellant is bad and the same is set aside. The Adjudicating Authority directed to grant the refund of balanceamount of Rs. 42,02,518/- in cash along with interest under Section 35FF of Central Excise Act. Thus, the appeal is allowed”.

Mr. Manoj Chaudhan, Chartered Accountant appeared for the Appellant and Ms. Tamanna Alam, Authorised Representative appeared for the Respondent.

To Read the full text of the Order CLICK HERE

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