Inadvertent Wrong Citation of Notification Not Fatal When Eligibility Conditions are same: CESTAT Sets Aside ₹82.84 Crore Demand of Erroneous Refund [Read Order]

The Kolkata Bench ofCustoms, Excise & Service Tax Appellate Tribunal (CESTAT) set aside a ₹82.84 crore demand for recovery of erroneous refund under Section 11A of theCentral Excise Act, 1944, holding that inadvertent citation of an incorrect exemption notification did not disentitle refund when substantive eligibility conditions were identical.

The Appeal arose out of Order-in-Original dated 20.07.2021 passed by the Commissioner, Central GST & Central Excise, Siliguri Commissionerate, confirming a demand of ₹82,84,25,639/- against the Appellant for the period March 2014 to January 2016, treating the refunds sanctioned as erroneous on the ground that the assessee did not satisfy the conditions under Notification No. 56/2003-CE as commercial production commenced on 20.04.2009, which was after the cut-off date of 31.03.2007 prescribed in the said notification.

The Appellant, M/s. Sun Pharma Laboratories Limited, established a manufacturing unit in Sikkim, availing excise duty exemption benefits under government notifications. The dispute arose concerning an alleged erroneous refund of Rs. 82,84,25,639/- demanded by the Commissioner, Central G.S.T. & Central Excise, Siliguri Commissionerate, the Respondent.

The Appellant commenced implementation of the project in 2005-2006 with an investment of ₹20.42 crores, employing about 100 employees. Commercial production began on 20.04.2009, and the appellant availed 56% exemption under Notification No. 56/2003-CE as amended. In October 2011, relying on the J&K High Court judgment in Reckitt Benckiser, the appellant sought to avail 100% exemption instead of 56%, which was objected to by the Department.

A Show Cause Notice was issued for excess credit taken during June-November 2012. The Commissioner, vide order dated 26.03.2014, confirmed a demand of ₹5.17 crores with interest and penalty, and withdrew the self-credit facility, requiring the appellant to file monthly refund claims. Following this, the appellant filed refund claims for March 2014 to January 2016 claiming 100% duty paid, inadvertently citing Notification No. 56/2003-CE instead of Notification No. 20/2007-CE.

The jurisdictional officer sanctioned these claims at 56% - claims from March 2014 to July 2015 under Notification 56/2003, and from September 2015 to January 2016 under Notification 20/2007. An audit objection was raised stating the appellant did not satisfy conditions under Notification 56/2003 as commercial production commenced on 20.04.2009, after the cut-off date of 31.03.2007.

Consequently, a Show Cause Notice dated 19.10.2016 was issued demanding recovery of ₹82.84 crores as erroneous refund under Section 11A of the Central Excise Act, 1944. The Commissioner confirmed the demand vide impugned order dated 20.07.2021, leading to the present appeal.

The Counsel for the Appellant, Ashok Nawal, Consultant [C.M.A.], argued that the inadvertent mention of Notification No. 56/2003 instead of No. 20/2007 should not disentitle them from the benefits, as both notifications had identical conditions and legislative intent to grant continuous benefits to industrial units in Sikkim. They cited several judicial precedents, including Share Medical Care v. Union of India, to support that a wrong notification mention does not negate an otherwise eligible benefit.

Further, the Counsel stated that the refund claims were sanctioned through formal Orders-in-Original by the Assistant/Deputy Commissioner, which were appealable orders. Since the Revenue did not challenge these refund sanctioning orders by filing appeals under Section 35E of the Central Excise Act, 1944, these orders had attained finality. Therefore, the subsequent Show Cause Notice under Section 11A to recover the "erroneous" refunds was legally unsustainable.

The Section 35E of the Central Excise Act, 1944 explained that: Powers of [Committee of Chief Commissioners of Central Excise] or [Principal Commissioner of Central Excise or Commissioner of Central Excise] to pass certain orders

“ The ²[Committee of ³[Principal Chief Commissioners of Central Excise or Commissioner of Central Excise]] or may, of its own motion, call for and examine the record of any proceeding in which a ⁴[Principal Commissioner of Central Excise or Commissioner of Central Excis]] as an adjudicating authority has passed any decision or order under this Act for the purpose of satisfying itself as to the legality or propriety of any such decision or order and may, by order, direct such ⁵[Commissioner ⁶[or any other Commissioner]] to apply to the Appellate Tribunal ⁷[or, as the case may be, the Customs and Excise Revenues Appellate Tribunal established under Section 3 of the Customs and Excise Revenues Appellate Tribunal Act, 1986] for the determination of such points arising out of the decision or order as may be specified by the ²[Committee of ³[Principal Chief Commissioners of Central Excise or Commissioner of Central Excise]] in its order:”

On the other hand, Special Counsel for the Respondent, P.R.V. Ramanan, countered that the Supreme Court's judgment entirely quashed the Sikkim High Court's order, and the Appellant's claim of inadvertent error was an afterthought, given their consistent reliance on Notification No. 56/2003 and also argued that Section 11A was clearly attracted for erroneous refunds and the demand was within the prescribed time limit

The Tribunal consisted of Judicial Member, R. Muralidhar and Technical Member, K. Anpazhakan, after hearing and considering the submissions made, found merit in the Appellant's arguments.

The Tribunal acknowledged the identical nature of benefits and conditions under Notification No. 56/2003 and No. 20/2007, concluding that the inadvertent error in mentioning the notification should not disentitle the Appellant from the eligible benefits, relying on the cited judgments and held that the refund sanctioning Orders-in-Original had attained finality as the Revenue failed to challenge them through the appeal mechanism provided under Section 35E.

Further, the Tribunal cited the Madras High Court's decision in Eveready Industries India Ltd. Vs CESTAT [Civil Misc Appeal No.973 of 2008 vide order dated 3.3.2016 - 2016 (337) E.L.T. 189 (Mad.) [03-03-2016], which ruled that once an adjudication order granting a refund attains finality, Section 11A cannot be invoked to recover the amount as an "erroneous refund" and to allow such recovery would permit a collateral proceeding to nullify a final order, which was impermissible.

Accordingly, the CESTAT set aside the impugned order confirming the demand for alleged erroneous refund, allowed the Appellant's appeal with consequential relief as per law, and disposed of the Respondent's cross-objection. The Order was pronounced in the open court on 04.11.2025.

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