Area Based Excise Refunds Cannot be Recovered Once Eligibility Settled: CESTAT Quashes ₹8.78 Crore Demand on GAIL [Read Order]
The Tribunal reiterates that settled eligibility under area based exemption schemes cannot be reopened to recover excise refunds already granted.
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Kolkata Bench has set aside an excise demand of ₹8.78 crore holding that refunds paid under a statutory area-based exemption cannot be recovered once the eligibility of the assessee has been conclusively judicially determined.
The appellant, GAIL (India) Ltd. had established an LPG Recovery Plant at Lakwa, Assam, and was producing LPG and Solvex-GL, a by-product obtained from natural gas. GAIL was claiming exemption and excise duty refunds under Notification No. 33/1999-CE, an area-based exemption for industrial units in the North Eastern Region.
The appellant had already been held eligible for exemption in earlier adjudication and appellate decisions when the Central Excise Department sent a new show cause notice years later, claiming that Solvex-GL was not a gas-based product and that the refunds were wrongly granted.
Further, the appellant argued that its right to exemption had been established in previous litigation, including before the Tribunal itself, and that the Department could not seek to relitigate these issues by seeking to reopen refunds long after they had been sanctioned.
The assessee highlighted that the Department's action to seek to recover the refunds was in violation of the established principle that once eligibility is finally established, it cannot be reopened retrospectively without new reasons.The Department argued that the classification of the product was erroneous and that the refunds were wrongly granted.
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The bench comprising Justice Ashok Jindal[Judicial Member] and K.Anpazhakan[Technical Member] agreed with GAIL, noting that the issue of refund eligibility was authoritatively adjudicated and could not be reopened through a show cause notice.
The Tribunal held that recovery was not permissible once the basic entitlement was finally adjudged to be established and therefore set aside the impugned demand.
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