A Two-Judge Bench of the Supreme Court ruled that a separate notice under Section 11A of the Central Excise Act of the Central Excise Act is not required for the recovery of an erroneous refund granted after the expiry of the prescribed time limit for filing a refund claim.
The issue at hand was whether a separate notice under Section 11A of the Central Excise Act is necessary for the recovery of an erroneous refund granted through the speaking order and is reviewed under Section 35E of the Central Excise Act.
The case involved a manufacturer of cotton yarn, who had challenged the levy and collection of duty on the yarn consumed by them. The Bombay High Court had disposed of the writ petition, upholding the validity of Rules 9 and 49 and holding that the recovery could only be done as per the time limit prescribed in Section 11A of the Central Excise Act.
The department challenged the order, and eventually, a show-cause notice was issued for deciding the issue of Section 11B of the Central Excise Act. The Deputy Commissioner of Central Excise adjudicated the show cause notice and ordered a refund of the entire amount to the respondent-company.
The department contended that Sections 35E and 11A of the Central Excise Act operate in different fields and are invoked for different purposes, and recovery of the excise duty cannot be made pursuant to an appeal filed after invoking the provisions of Section 35E of the Central Excise Act if the time limit provided in Section 11A of the Central Excise Act has expired.
The respondent company contended that the erroneous refund cannot be recovered by merely filing an application under Section 35E of the Central Excise Act(2) of the Central Excise Act unless the notice under Section 11A of the Central Excise Act is issued within the stipulated time.
It was observed that, “The Special Bench of the Tribunal took the view that Section 35E of the Central Excise Act and Section 11A of the Central Excise Act operate in different fields and are invoked for different purposes and different time limits are therefore set out therein. This Court in the case of Asian Paints (India) Ltd. specifically negated and/or did not accept the submission on behalf of the assessee that the recovery of excise duty cannot be made pursuant to an appeal filed invoking the provisions of Section 35E of the Central Excise Act if the time limit under Section 11A of the Central Excise Act has expired.”
The Supreme Court Bench of Justice M R Shah and Justice Krishna Murari also noted that, “the (Bombay) High Court has without giving any reasons how the same is misplaced has ignored to follow the decision of this Court in the case of Asian Paints (India) Ltd. and rather has followed its earlier decision in the case of Bajaj Auto Ltd which admittedly was prior to the decision of this Court in the case of Asian Paints (India) Ltd. .”
It was thus clarified that, once the order originally sanctioning the refund came to be set aside, there was no need for any further notice under Section 11A of the Central Excise Act.
The court thus held that from the scheme of the Central Excise Act, it is quite apparent that where proceedings under Section 35E of the Central Excise Act are initiated and an appeal is filed against the order sanctioning a refund, there is no need to issue any notice under Section 11A of the Central Excise Act.
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