Shri Krishna Keshav Laboratories Ltd vs Commissioner (Appeals), CGST, Ahmedabad

GST update /2026-27/0051

GST UPDATE on Shri Krishna Keshav Laboratories Ltd vs Commissioner (Appeals), CGST, Ahmedabad

2026-TIOL-941-CESTAT-AHM | Excise Appeal No. 10632 of 2020 | CESTAT, Ahmedabad

Brief Facts

The appellant, engaged in the manufacture of I.V. Fluids and availing exemption under Notification No. 1/2011-CE, discharged excise duty for the period March 2016 to March 2017 by debiting the Cenvat credit account. On audit, it was pointed out that in terms of the proviso to Rule 3(4) of the Cenvat Credit Rules, 2004, Cenvat credit could not be utilised for payment of duty on goods cleared under Notification No. 1/2011-CE. The appellant thereupon paid the same amount again, this time through the account current (i.e., in cash), along with applicable interest and penalty, resulting in a double payment of duty.

A refund claim of Rs. 21,95,560/- (comprising Rs. 15,72,845/- towards duty, Rs. 3,86,788/- towards interest and Rs. 2,35,925/- towards penalty) was filed under Section 142(3) of the CGST Act, 2017 seeking refund of the amount originally paid through the Cenvat account. The Department rejected the refund on the ground that the ER-1 return for March 2017 was filed on 08.04.2017, whereas the refund application was filed only on 27.05.2019, rendering the claim time-barred under Section 11B of the Central Excise Act, 1944. It was further alleged that the payment was not made under protest and that the appellant had failed to produce substantive evidence of the wrong payment.

Issue

Whether refund of the duty amount originally paid through the Cenvat credit account and subsequently paid a second time in cash could be denied on the ground of limitation under Section 11B, where the claim was not made under protest.

Contentions of the Appellant

• Appellant placed reliance on 3E Infotech vs. CESTAT Chennai, reported in 2018 (18) GSTL 410 (Madras), where the Hon'ble Madras High Court held that where tax is paid under a mistake of law, a refund claim cannot be barred merely because the limitation period under Section 11B has expired.

• The audit report established that the appellant had wrongly utilised Cenvat credit for payment of duty on goods cleared under Notification No. 1/2011-CE, and that the appellant had consequently paid the identical amount again through cash demonstrating double payment. The error was an inadvertent, bona fide mistake in the mode of payment, not a deliberate contravention of Rule 3(4).

• Denial of refund in such circumstances would violate Article 265 of the Constitution of India, which mandates that no tax shall be levied or collected except by authority of law

Contentions of the Respondent

The refund claim was filed on 27.05.2019 against duty paid for clearances up to March 2017, therefore the same was beyond the limitation period prescribed under Section 11B. Further, the amount was not paid under protest. Accordingly, the rejection of the refund claim by both lower authorities was correct.

Held

The Tribunal held that the wrong utilisation of Cenvat credit was pointed out by audit itself, and the appellant thereafter paid the duty again in cash along with interest and penalty, which clearly established that duty had been paid twice. It was observed that this was not a deliberate contravention of Rule 3(4) but only a bona fide mistake in the mode of payment, and there was nothing on record to show any deliberate intention to evade payment of duty. The appellant had not avoided payment of duty at all; it had merely discharged the same liability initially through the Cenvat account instead of cash, and on the mistake being pointed out, corrected the mode of payment by paying again in cash. The Tribunal also placed Reliance on the ratio in 3E Infotech vs. CESTAT Chennai [2018 (18) GSTL 410 (Madras)], where the Madras High Court following the Bombay High Court's decision in Parijat Construction vs. Commissioner, Central Excise, Nashik [2011 (359) ELT 113 (Bom.)] which held that where tax is paid under a mistake of law, the limitation prescribed under Section 11B does not apply. It also focused on the Supreme Courts decision in case of Collector of Central Excise, Chandigarh vs. Doaba Co-operative Sugar Mills which held that the Revenue cannot retain the amount without authority of law notwithstanding expiry of the statutory limitation period.

On this basis, the Tribunal set aside the rejection of refund on the ground of limitation and held that the appellant was entitled to refund of the amount originally paid through the wrongly utilised Cenvat credit, since the subsequent cash payment represented the correct and final discharge of duty for the period in question.

CA Pradeep Jain_

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