Rebate claim cannot be adjusted against demands that have not attained finality.

PJ/Case law/2013-14/1912

Case:-INDORAMA SYNTHETICS (I) LTD. Vs COMMISSIONER OF C. EX., NAGPUR

Citation:-2013 (291) E.L.T. 559 (Tri. - Mumbai)

Brief Facts:-Brief facts of the case are that the appellant is an exporter of synthetic filament yarn. After exporting, the appellant had filed rebate/refund claim of duty paid on excisable goods under Rule 5 of CENVAT Credit Rules, 2004. The refund claim was sanctioned but the same was adjusted against some demands confirmed by the adjudicating authority in some other proceedings against which the appeal is pending. A show-cause notice was issued on 24th May, 2010 demanding drawback already sanctioned to the appellant. Thereafter on 25th October, 2010, the demand was confirmed against the appellant which was challenged by the appellant before the Commissioner (Appeals) who asked the appellant to make a pre-deposit of 100% of demand on 17-2-2011. As the appellant could not pay the amount as directed by the appellate authority, their appeal was dismissed for non-compliance of stay order. The appellant filed a revision application before the Joint Secretary (Revisionary Authority) who also dismissed their stay application and asked the appellant to make a pre-deposit of 100% demand. The said order was challenged by the appellant in Writ Petition No. 3852/11 before the Hon’ble Bombay High Court. The Hon’ble High Court of Bombay, on 21-9-2011, directed the appellant to furnish a bank guarantee of Rs. 2 crore and ordered that on furnishing of such bank guarantee, the Revisionary Authority shall hear the application on merit. Despite the said order of the Hon’ble High Court, the Revenue had appropriated the amount of rebate sanctioned against the demand discussed here-in-above. The Commissioner (Appeals) also confirmed the order of adjustment by the adjudicating authority.

Appellant Contentions:-The appellant submits that adjusting the rebate claim against duty demand arising out of other proceedings which are premature, is incorrect, as the Hon’ble High Court of Bombay has granted stay on furnishing the bank guarantee of Rs. 2 crores. The bank guarantee is still alive and the proceeding before the Revisionary Authority is still pending. Therefore, adjusting against the pre-matured demand is not sustainable as held by the Hon’ble High Court of Madhya Pradesh in the case of National Steel Industries Ltd. v. Union of India - 2001 (134)E.L.T. 616 (M.P.) and CCE, Bangalore-III v. Stella Rubber Works (Unit-II) - 2012 (275)E.L.T. 404 (Kar.).

Respondent Contentions:-The respondent reiterated the findings of the impugned order.

Reasoning of Judgement:-It is an admitted fact that theproceedings against the show-cause notice dated 24-5-2010 are still pending and the demand confirmed against the appellant have not obtained finality. Further by an order dated 21-9-2011, the demand confirmed against the appellant in proceeding of the show-cause notice dated 24-5-2010 has been stayed on furnishing of Bank Guarantee of Rs. 2 Crores. In these circumstances, Tribunal was of the view that when the demand against the appellant has not attained finality, the Revenue cannot adjust the amount sanctioned against these demands. Same view has been taken by the Hon’ble High Court of Madhya Pradesh and Hon’ble High Court of Karnataka in the cases ibid relied on by the learned Counsel during the course of arguments. In these circumstances the impugned order quo adjusting the sanction of refund claim against the duty demand arising out of a separate proceeding is set aside and the adjudicating authority is directed to issue the rebate/refund claim within 15 days of receipt of this order.

Decision:-Appeal allowed.

Comment:-The crux of this case is that the rebate/refund claims of the assessee cannot be adjusted against the demands that are disputed and are pending before the appellate authorities and are under litigation.

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PJ/Case law/2013-14/1912

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