Recovery u/s 11A is Unjustified as Refund Orders Had Attained Finality Without Appeal: CESTAT [Read Order]

The Chandigarh Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the Revenue Department cannot invoke Section 11A of the Central Excise Act, 1944 to recover an amount refunded to taxpayer if the original refund orders, sanctioned underSection 11B, were not challenged by way of an appeal and had thus attained finality.

Harsoria Healthcare Pvt Ltd (Respondent), a Export Oriented Unit (EOU), had filed 26 refund claims for unutilized CENVAT credit on a monthly basis between March 2012 and July 2014. The proper officers examined these claims and sanctioned them through various speaking orders.

The Department entertained the view that the refunds were "erroneous" because the respondent had filed claims monthly instead of quarterly, allegedly violating Notification No. 27/2012-C.E. (N.T.). Consequently, the Department issued a Show Cause Notice under Section 11A to recover the refunded amount.

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The Adjudicating Authority (Commissioner) dropped the demand and held the lapse was merely procedural. The Revenue Department appealed to the Tribunal, arguing that under Section 11A, they are entitled to recover any "erroneously refunded" duty, citing the Supreme Court judgment in Grasim Industries Ltd. and Indian Dyestuff Industries Ltd.

The Respondent contended that the original refund orders were speaking orders passed after due verification. Since the Department never challenged these orders before the Appellate Authority, they attained finality. Therefore, the refunds could not be termed "erroneous" in collateral proceedings initiated under Section 11A of the Central Excise Act.

The Bench, comprising S.S. Garg (Judicial Member) and P. Anjani Kumar (Technical Member), rejected the Revenue's reliance on Indian Dyestuff, noting that in those cases, refunds were often provisional or conditional. In the present case, the refunds were final and unconditional.

The Tribunal relied on the decision in Bridgestone India Private Ltd. Vs. Commissioner of CGST, which held that Section 11A and Section 11B operate in different streams. The tribunal observed that once a determination under Section 11B results in a refund order, and that order attains finality, the amount cannot be recovered as an "erroneous refund".

The tribunal highlighted that the correct course for the Department would have been to file an appeal against the refund orders.

The Bench observed that once the refund has been validly sanctioned by way of a speaking order and the same has not been challenged by the Revenue, subsequently show cause notice cannot be issued under Section 11A for recovery of the said refund alleging the same as erroneous.

The Tribunal held that the recovery proceedings were without jurisdiction as the original refund orders remained valid and binding. The appeal filed by the revenue was dismissed.

The Chandigarh Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the Revenue Department cannot invoke Section 11A of the Central Excise Act, 1944 to recover an amount refunded to taxpayer if the original refund orders, sanctioned under Section 11B, were not challenged by way of an appeal and had thus attained finality.

Harsoria Healthcare Pvt Ltd (Respondent), a Export Oriented Unit (EOU), had filed 26 refund claims for unutilized CENVAT credit on a monthly basis between March 2012 and July 2014. The proper officers examined these claims and sanctioned them through various speaking orders.

The Department entertained the view that the refunds were "erroneous" because the respondent had filed claims monthly instead of quarterly, allegedly violating Notification No. 27/2012-C.E. (N.T.). Consequently, the Department issued a Show Cause Notice under Section 11A to recover the refunded amount.

The Adjudicating Authority (Commissioner) dropped the demand and held the lapse was merely procedural. The Revenue Department appealed to the Tribunal, arguing that under Section 11A, they are entitled to recover any "erroneously refunded" duty, citing the Supreme Court judgment in Grasim Industries Ltd. and Indian Dyestuff Industries Ltd.

Complete Supreme Court Judgment on GST from 2017 to 2024 with Free E-Book Access, Click here

The Respondent contended that the original refund orders were speaking orders passed after due verification. Since the Department never challenged these orders before the Appellate Authority, they attained finality. Therefore, the refunds could not be termed "erroneous" in collateral proceedings initiated under Section 11A of the Central Excise Act.

The Bench, comprising S.S. Garg (Judicial Member) and P. Anjani Kumar (Technical Member), rejected the Revenue's reliance on Indian Dyestuff, noting that in those cases, refunds were often provisional or conditional. In the present case, the refunds were final and unconditional.

The Tribunal relied on the decision in Bridgestone India Private Ltd. Vs. Commissioner of CGST, which held that Section 11A and Section 11B operate in different streams. The tribunal observed that once a determination under Section 11B results in a refund order, and that order attains finality, the amount cannot be recovered as an "erroneous refund".

The tribunal highlighted that the correct course for the Department would have been to file an appeal against the refund orders.

The Bench observed that once the refund has been validly sanctioned by way of a speaking order and the same has not been challenged by the Revenue, subsequently show cause notice cannot be issued under Section 11A for recovery of the said refund alleging the same as erroneous.

The Tribunal held that the recovery proceedings were without jurisdiction as the original refund orders remained valid and binding. The appeal filed by the revenue was dismissed.

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