Relief for Rayban: Rajasthan HC quashes CENVAT refund rejection, directs payment of ₹16.89 lakh with 12% interest [Read Order]

Rayban Sun Optics India Pvt. Ltd.,petitioner-assessee, was engaged in manufacturing sunglasses and spectacle frames under Chapter 90 of the Central Excise Tariff Act, 1985. A show cause notice was issued in May 2004 for non-reversal of CENVAT credit on inputs written off in A.Y. 2000-01, demanding Rs.16,89,669/- with interest and penalty. This resulted in an order against the petitioner in October 2004.

The petitioner’s appeal was rejected by the Commissioner (Appeals) in March 2005, but the Customs Excise Service Tax Appellate Tribunal ( CESTAT ) in March 2012 set aside the demand and allowed relief. The department’s appeal before the Rajasthan High Court was dismissed in April 2017 on monetary limit grounds. Based on this, the petitioner filed a refund claim in February 2018.

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The Assistant Commissioner rejected the refund in October 2018 as time-barred, and the Commissioner (Appeals) upheld this in September 2019. However, the CESTAT in June 2021 ruled that the refund claim was within time since the right arose only in April 2017. Despite this, the refund was again denied, treating the October 2022 claim as time-barred from the date of the CESTAT order.

The petitioner counsel argued that the refund was wrongly rejected as time-barred under Section 11B. He stated that the first refund claim was filed on 19th February 2018, and the CESTAT in its order dated 29th June 2021 had directed the department to refund the amount based on that claim. He submitted that once the CESTAT order became final, the rejection of the refund on 4th January 2023 was illegal.

The department counsel objected to the writ petition, saying the petitioner had an alternative remedy of appeal under Section 35. He also argued that the refund claim filed on 6th October 2022 was beyond one year from the CESTAT order dated 29th June 2021 and was rightly rejected.

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Justice K.R.Shriram and Justice Maneeh Sharma held that the objection on maintainability was not valid since the petitioner’s refund claim had already been upheld after years of litigation. It noted that the CESTAT in its order dated 29th June 2021 had clearly held the refund claim to be within time, and that order had attained finality as it was not challenged by the department.

Despite this, the refund was again rejected on 4th January 2023 on limitation grounds, which the Court found to be unjust and harassing.

The Court ruled that the department was bound to refund the amount and also compensate the petitioner for the delay. It directed the department to refund Rs.16,89,669/- with 12% interest per annum, calculated from 19th February 2018, the date of the first refund application, until actual payment. The refund and interest were ordered to be released within six weeks.

The writ petition was allowed and the order dated 4th January 2023 was quashed.

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