Refund cannot be adjusted against Disputed Penalty when 25% Reduced Penalty Paid within Time: CESTAT Orders Refund with Interest [Read Order]
CESTAT ruled Revenue cannot adjust refund against disputed penalty, holding Icon Industries rightly paid reduced penalty within time and entitled to refund with interest.
Refund - CESTAT - Refund - Interest - Taxscan
Refund - CESTAT - Refund - Interest - Taxscan
The New Delhi Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has set aside the adjustment of refund against a disputed penalty, ruling that revenue cannot deny refund on the ground of penalty liability when the appellant had availed the statutory option of reduced penalty within the prescribed time.
The appellant, Icon Industries, was engaged in the manufacture and clearance of PVC separators for batteries using imported PVC resin.
A case was booked against the appellant alleging clandestine removal of PVC separators, and a Show Cause Notice (SCN) dated 08.04.2005 was issued for the period 2002-03 proposing a demand of ₹54,09,363 along with interest and penalty.
During the investigation, the appellant paid ₹50,00,000, and after the adjudication, paid the balance amount of duty and 25% of the duty as a penalty. The adjudication order dated 17.10.2012 confirmed the demand and interest, and imposed a penalty equal to the duty. An option was given to pay only a 25% penalty if paid within 30 days of communication of the adjudication order.
The appellant contended that the adjudication order was received on 24.01.2013 and also paid the required amounts within 30 days, seeking the benefit of reduced penalty.
The department argued that the adjudication order was received on 07.11.2012 and claimed that the full penalty was recoverable. Consequently, 75% of the penalty was recovered and adjusted against a subsequent refund claim.
The refund claim related to Cenvat credit on imported PVC resin was finally approved after an order by the Hon’ble High Court of Delhi, which recognized the appellant’s entitlement to this credit.
The assessee filed the refund claim on 7.08.2018 for ₹51,35,542 with ₹36,62,123 sanctioned, but ₹3,94,890 was recovered as a penalty adjustment.
The appellant appealed the adjustment, arguing the correct receipt date was 24.01.2013, as by Form E.A.-3, and maintained that the reduced penalty was proper.
The Tribunal recorded the date of communication of the adjudication order as 24.01.2013 and also observed that the Revenue had never disputed this date earlier. Therefore, the appellant’s payment of a 25% penalty within 30 days was valid. Consequently, no higher penalty was payable, and no adjustment could be made from the sanctioned refund.
The single bench comprising Ashok Jindal (Judicial Member) held that the appellant was entitled to a refund of the adjusted amount and also directed that interest shall be payable from three months after the filing of the refund claim, i.e., 07.08.2018, till its realization.
Accordingly, the appeal was allowed, and the adjustment of the refund against penalty was set aside.
The appellant was represented by A.K. Prasad, while Rohit Issar represented the revenue.
Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
