Refund claim of amount paid during the course of investigation.

PJ/CASE LAW/2015-16/2827

Case:-COMMISSINER OF C. EX. & SERVICE TAX, BHAVNAGAR VERSUS HK DAWE LTD.

Citation:- 2015(38) S.T.R. 77(Tri.-Ahmd.)

Brief Facts:-This appeal has been filed by the Revenue against OIA No. 35/2013(BVR)/SKS/Commr(A)/Ahd, dated 27-2-2013. Under the OIA dated 27-2-2013, first appellate authority has allowed the appeal filed by the present Respondent holding that refund claimed is not time-barred as the same was a ‘deposit’ and not payment of duty to which provisions of Section 11B of the Central Excise Act, 1944 are applicable.

Appellant’s contention:-Shri Alok Srivastava (AR) appearing on behalf of the Revenue argued that refund claim was filed on 24-7-2012 in view of the order dated 17-12-2008 - 8-1-2009 passed by CESTAT. It was his case that since the refund claim was filed after one year from the date of CESTAT’s order, the same has to be considered as time barred as per the provisions contained in Explanation (B) (ec) of Section 11B of Central Excise Act, 1944. It was his case that order passed by the first appellate authority may be set aside and the order passed by the Adjudicating authority should be restored.

Respondent’s Contention:-Ms. Richa Goyal (CS) appearing for the respondent on the other hand argued that the amount was paid during the course of investigation and the issue was being agitated on merits. That in appeals, Respondent won the case on merits and thus the amounts paid has to be considered as deposit and cannot be considered as payment of duty. It was her case that the provisions of refund under Section 11B of the Central Excise Act, 1944 are not applicable to the present proceedings. She relied upon the case laws of CESTAT, Mumbai in the case of Kunj Behari Dye Chem Private Limited v. CCE (Appeal-II), Bangalore [2011 (22) S.T.R. 253 (T) = 2009 (241) E.L.T. 84 (Tri. Bang.)].

Reasoning of Judgment:- Heard both sides and perused the case records. Brief facts of the case are that appellant paid certain amounts during the course of investigation and contested the issue on merits in the appeal proceedings. The amounts paid by the present Respondent were considered sufficient by CESTAT in an appeal filed by Respondent for satisfying the deposit requirement under Section 35F of the Central Excise Act, 1944. Respondents won the case on merits and sought refund of the amounts paid. It is the case of the Revenue that as refund sought was after the period of limitation as per Section 11B of the Central Excise Act, 1944, the same should be considered as time barred and that first appellate authority has wrongly allowed the appeal of the Respondent. It is observed from the case records that the amounts were paid during the investigation and issue was agitated by the appellant on merits. In the appeal proceedings Respondent won the case on merits and filed refund claim. Action of the Respondent by contesting the issue on merits itself constitutes a case of ‘deemed protest’ and no time limit will be applicable even as per the second proviso to Section 11B of the Central Excise Act, 1944. However, the amounts were not paid as duty at the time of providing of services but was paid only when the investigation was initiated by the Revenue. In the facts and circumstances the amounts paid will be a case of ‘Deposit’ and will not be a situation of payment of duty when on merits Respondent got a favourable order from the appellate channel. The amount so paid was not recovered on the invoices and department has also not rejected the refund claim on unjust-enrichment. Accordingly, it is held that amounts paid by the Respondent was a ‘Deposit’ and not payment of duty when on merits the case was decided in favour of the Respondent.
Once it is held that the amounts paid by the respondent is a ‘Deposit’ the law laid down by CESTAT, Bangalore in the case of Kunj Behari Dye Chem Private Limited v. CCE (Appeals-II), Bangalore(supra), relying upon the Supreme Court’s judgment and other case laws, will be squarely applicable to the facts of the present case. Paras 3.1 and 3.2 of this case are relevant and are reproduced below :-
“3.1 In view of the above decision, it was urged that the lower authority could not have applied the general law of limitation to reject the refund claim. In any case, since the amount is a deposit, Section 11B is not applicable and the revenue ought to have suo motu refunded the same. My attention was also invited to Supreme Court’s decision in the case of Shiv Shankor Dal Mills v. State of Haryana - AIR 1980 (S.C.) 1037 wherein it has been held as follows :
Where public bodies, under colour of public laws, recover people’s money, later discovered to be erroneous levies, the Dharma of the situation admits of no equivocation. There is no law of limitation, especially for public bodies, on the virtue of returning what was wrongly recovered to whom it belongs. Nor is it palatable to our jurisprudence to turn down the prayer for high prerogative writs, on the negative plea of ‘alternative remedy’ since the root principle of law married to justice, is ubi jus ibi remedium.
3.2 Further following case-laws were relied on to hold that the time limit under Section 11B will not be applicable to refund of pre-deposit made under Section 35F of the Central Excise Act.
(i)        Gujarat State Fertilizers & Chem. Ltd. v. CCE, Vadodara - 2005 (186) E.L.T. 607 (Tri. - Mumbai)
(ii)       Konark Cylinders v. CCE, BBSR - 2002 (144) E.L.T. 454 (Tri.-Kolkata)
(iii)      Nelco Limited v. UOI - 2002 (144) E.L.T. 56 (Bom.)
(iv)      CCE, Chennai-III v. Consul Consolidated P. Ltd. - 2002 (141) E.L.T. 792 (Tri. - Chennai)
(v)       Wimco Limited v. UOI - 1989 (43) E.L.T. 628 (All.).”
In view of the above observations and settled position of law, appeal filed by the Revenue is rejected.

Decision:- Appeal rejected.

Comment:-The substance of this case is that amount paid during the investigation should be treated as deposit and are not to be considered as payment of duty. Therefore, the provisions of limitation prescribed under section 11B of the Central Excise Act, 1944 as applicable for refund of duty will not be applicable in case of refund of deposit.

Prepared by:- Bharat singh

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PJ/CASE LAW/2015-16/2827

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