Supreme Court Ruling Invalidates CVD Refund Claims on CNG/LPG Vehicle Kits: CESTAT Upholds Recovery of ₹1.79 Cr Refund With Interest [Read Order]
The Supreme Court, however, overturned those orders, ruling that the refund claims were not maintainable. Following this, the department initiated recovery of the erroneously refunded amounts along with interest under the Customs Act.
The Hyderabad bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has upheld the recovery of Rs 1.79 cr refund with interest following the Supreme Court ruling that invalidated the appellant's Countervailing Duty(CVD) claim on CNG/LPG vehicle conversion kits.
M/s Standard Consultants Ltd, engaged in importing kits for converting motor vehicles to CNG or LPG, had filed for refunds of the Central Value Added Duty (CVD) paid during imports.
The appellant relied on earlier favourable decisions of the CESTAT (Bangalore) in 2008 and subsequent orders of the Tribunal in 2015 and 2016, which interpreted Notification No. 21/2002-Cus, S.No. 229, as allowing refunds when Column 5 indicated “–” (Nil). Based on these orders, the company had successfully received refunds from the department.
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However, the Department challenged the Tribunal’s decisions before the Supreme Court. In CCC & ST, Hyderabad v. Standard Consultants Ltd [2022 ], the Supreme Court ruled that the Tribunal orders were incorrect and the refund claims were not maintainable.
The Supreme Court’s decision effectively nullified the legal basis on which the appellant had claimed and received the refunds. The Court’s verdict emphasised that reliance on now-invalidated Tribunal orders could not justify the refunds.
In line with the Supreme Court ruling, the department issued Show Cause Notices (SCNs) for the recovery of erroneously refunded amounts totaling ₹1.79 crore, covering three separate transactions of ₹60.69 lakh, ₹37.68 lakh, and ₹80.98 lakh.
The recovery notice also included interest, citing Sections 28 and 28AA of the Customs Act, which empower the authorities to reclaim duty that was erroneously refunded or short paid, along with interest on the amounts due.
The appellant challenged these recovery actions before the Tribunal, arguing that the refunds were initially sanctioned in good faith and based on Tribunal precedent. Their counsel emphasised the earlier favourable orders and contended that the company had acted correctly in claiming the refunds.
Despite these submissions, the two-member bench of AK Jyotishi(Technical member) and Angad Prasad (Judicial Member) observed that the Supreme Court had set aside the Tribunal’s orders, leaving no legal ground to sustain the refund claims.
The Tribunal further noted that the department’s powers under the Customs Act to recover erroneously refunded duties, along with interest, were unambiguous.
The Tribunal concluded that the recovery was justified, lawful, and in accordance with statutory provisions. Consequently, the appeals filed by M/s Standard Consultants Ltd were dismissed, confirming both the recovery of principal amounts and interest.
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