Whether appropriation of sanctioned rebate against outstanding dues without intimation justifiable when stay application pending?

PJ/Case Laws/2012-13/1363

Case:- MARS INTERNATIONAL V/s COMMISSIONER OF CENTRAL EXCISE, PUNE-III

Citation: - 2012-TIOL-1868-CESTAT-MUM

Brief Facts:- The appellant, M/s. Mars International, Goregaon (East), Mumbai, filed two rebate claims, one dated 15/09/2011 for an amount of Rs.2,38,301/- and another 03/10/2011 for an amount of Rs.58,420/- respectively under Rule 18 of the Central Excise Rules, 2002 in respect of goods manufactured and exported by them. These claims were sanctioned by the jurisdictional Deputy Commissioner vide order dated 12/12/2011 and 29/12/2011. However, the said Deputy Commissioner while sanctioning the rebate, appropriated the same under Section 11 of the Central Excise Act, 1944 towards dues pending from the appellant vide order-in-appeal No. SB (08 to 10) M.V/2011 dated 08/02/2011 without putting the appellants to notice. The appellant preferred appeals against the said appropriation order before the lower appellate authority and contended that appropriation under Section 11 is not permissible in law.

Appellants Contention:- The Ld. Counsel for the appellant contended that appropriation under Section 11 is not permissible in law, in view of the decisions of the Hon'ble High Court of Bombay in the case of Thermo Plastic Industries Vs. UOI , reported in1991 (51) ELT 629 (Bom), Hon'ble High Court of Allahabad in the case of Vespa Car Co. Ltd., Vs.CCE, 1992 (61) ELT 16 (All) , Hon'ble High Court of Rajasthan in the case of Shree Cement Ltd.,Vs. UOI, 2001 (133) ELT 301 (Rj) =2003-TIOL-414-HC-RAJ-CX ,Hon'ble High Court of MadhyaPradesh in the case of National Steel Industries Ltd., Vs. UOI, 2001 (134) ELT 616 (P) , Hon'bleHigh Court of Karnataka in the case ofCascade Systems Vs. CC, Bangalore, 2004 (165) ELT 400(Kar) wherein it has been uniformly held by the Hon'ble High Courts that when the stay application is pending before the higher appellate authority against the orders of the lower appellate authority, coercive measures cannot be initiated against the appellants.

He also submitted that against the order of the lower appellate authority dated 08/02/2011 cited supra, they have preferred an appeal before the CESTAT and the stay is likely to be decided shortly. However, the Ld. Lower appellate authority did not heed to this pleading and dismissed their appeal.

The learned counsel also submits that this Tribunal vide order dated 18/01/2012 granted stay against the order-in-appeal dated 08/02/2011 referred to supra, considering the fact that the appellant had already paid the duty involved along with 25% of the penalty imposed. Therefore, appropriation of the amount by the lower authority tantamount to nullifying the stay order granted by this Tribunal and is not sustainable in law, in view of the decisions relied upon cited supra.

Respondents Contention:- The Ld. Dy. Commissioner (AR) appearing for the revenue reiterates the findings of the lower authority. However, she fairly concedes that as per the judicial pronouncements cited by the Counsel for the appellant, the lower authority should not have appropriated the amounts when the stay application was pending.

Reasoning of Judgement:- The Hon'ble High Court of Karnataka in the case of CCE, Bangalore Vs. Stella Rubber Works,reported in 2012 (275) ELT 404 (Kar) held that Section 11 of the CentralExcise Act, 1944 does not contemplate adjustment of monies due to the assessee towards theamount due to the revenue and further held that once the adjudicating authority holds that theassessee is entitled to refund, in the absence of a specific provisions authorizing the revenueadjusting the said amount towards dues to them, it is improper to make adjustment. The Hon'ble High Court of Bombay in the case of Thermo Plastic Industriescited supra held that initiation of coercive measures to recover dues when appeal is pending before the higher authority is not sustainable in law. Similar view was taken by the Hon'ble High Courts of Allahabad, Rajasthan, Madhya Pradesh and Karnataka in the many cases. Therefore, the appropriation of the amounts when the appellant's stay application was pending before the Tribunal is not sustainable in law.

Decision:-The impugned order was set aside and directs the jurisdictional Deputy Commissioner to refund the appropriated amount forthwith to the appellant along with interest thereon in accordance with the law.

Comment:- The analogy drawn from this case is that refund sanctioned to the assessee cannot be appropriated against the amount due from the assessee that is under litigation and for which stay application has been filed by the assessee.

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PJ/Case Laws/2012-13/1363

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