In a significant case, the High Court of Jammu & Kashmir and Ladakh set aside the extended period of limitation since the revenue fails to prove unjust enrichment on sanctioned erroneous refund of excise duty.
The Revenue filed an appeal under Section 35 G of the Central Excise Act, 1944 [‘the Act’] against a final order passed by the Customs, Excise & Service Tax Appellate Tribunal, Chandigarh [‘CESTAT’] whereby the appeal preferred by the respondent has been accepted and the impugned order dated 17.02.2011 passed by the Commissioner, Central Excise, J&K, Jammu has been set aside.
Krishi Rasayan Exports Pvt. Ltd, the respondent is engaged in manufacturing of various products like Pesticides, Insecticides, Herbicides and Plant Growth Regulators and has established its unit at SIDCO Industries Complex, Samba. The respondent is registered for the manufacture of aforesaid products under Tariff Heading Nos. 38089330, 38089990, 38089090 & 38089340 respectively of the 1st Schedule to the Central Excise Tariff Act, 1985.
The respondent being eligible had been availing exemption/refund of excise duty under Notification No. 56/2002-CE dated 14.11.2002 as amended [‘the exemption notification’]. The respondent filed monthly claims of exemption for the period from 2005-06 to 2008-09 which was duly sanctioned by the appellant in favour of the respondent by passing separate orders for each month.
The orders passed by the appellant for exemption/refund under the exemption notification were not assailed by the appellant-revenue and instead, the sanctioned amount was released in favour of the respondent
The appellant viewed that the respondent had willfully suppressed/misstated the facts to the appellant revenue with an intent to pay duty on goods which were otherwise exempted and consequently, take an erroneous refund under the exemption notification.
A show cause notice was issued to the respondent for recovery of erroneous refund sanctioned in its favour on the ground that the goods in question were not dutiable and, therefore, the respondent was neither liable to pay the duty, nor was entitled to refund of the same. The said show cause notice culminated in the order in originally passed by the appellant and demand was confirmed along with interest and penalty. The CESTAT allowed the appeal of the respondent.
through the entire record, but could not find an iota of material on record which would suggest that the assessee-the respondent herein had, at any time, suppressed any material facts or made any willful misstatement as is attributed to it by the Adjudicating Authority in the Order In Original passed for recovery of purported erroneous refund. Rather, it has come on record that the respondent had fairly and transparently explained the entire process leading to the manufacture of the product in question in the industrial unit of the respondent.
The refund of excise duty claimed by an assessee and sanctioned by the competent Authority vide its order under Notification No. 56 of 2002-CE which order has attained finality as not having been challenged before any appellate or revisional authority under the Excise Act cannot be termed as ‘erroneous refund’ and recovered by resort to section 11A of the Act.
The extended period of limitation provided under the proviso to sub-section 1 of section 11A is not attracted as we find no material on record to demonstrate that the purported erroneous refund was sanctioned in favour of the respondent-assessee based on some fraud, collusion or misstatement/misrepresentation of facts and, that too, to evade payment of excise duty.
A division bench comprising Justice Sanjeev Kumar and Justice Javed Iqbal Wani while dismissing the petition observed that the revenue has also failed to make out a case of unjust enrichment having failed to show how the respondent has benefited by such purported erroneous refund sanctioned in its favour by the Competent Authority.
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