Whether mere filing of appeal to High Court be grounds for issuing SCN proposing to recover refund claim sanctioned to the assessee?

PJ/Case Study/2013-14/58

CASE STUDY

Prepared by:-CA Neetu Sukhwani &
Hushen Ganodwala

Introduction:- The assessee is engaged in the activity of cutting, stitching, eyeleting and packing of Tarpaulin. The Department carried out the search of the factory premises of the appellant and detained the goods found at the factory. The seized goods were released on execution of a Bond along with the cash security. Thereafter department issued Show cause notice to the assessee. The adjudicating authority passed the order to confiscate the seized goods, imposed penalty, confirmed the demand of Central Excise Duty and Education cess along with interest and penalty and also imposed penalty on various persons as mentioned in the show cause notice. Aggrieved by the aforesaid Order in Original, the appellant filed the appeal before Commissioner (Appeal) along with Stay application. Commissioner (Appeal) ordered for pre deposit. Assessee deposited the said amount but Commissioner (Appeals) upheld the order passed by the adjudicating authority. Thereafter appellant filed appeal before CESTAT against OIA. The Tribunal passed order in favour of assessee. The appellant filed consequential refund claim. The refund claim was sanctioned by the adjudicating authority. However, the Department filed appeal against order of Tribunal before High Court. Thereafter, department issued show cause notice on the ground that refund has been erroneously sanctioned to the assessee and resorted for recovery of amount of refund claim sanctioned to appellant under Section 11A along with interest under section 11AA. The High court subsequently gave order in favour of the assessee and consequently, the adjudicating authority also dropped the recovery proceedings initiated against the assessee vide the impugned show cause notice.

M/S MOHAN SALES CORPORATION VS THE ADDITIONAL COMMISSIONER, CENTRAL EXCISE, AHEMDABAD-I

[SHOW CAUSE NOTICE NO. V.39/15-8/Mohan/ADC/OA-I/2012]

Relevant Legal Provisions:-

SECTION 11A: Recovery of duties not levied or not paid or short-levied or short-paid or erroneously refunded:-

(1) Where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, for any reason, other than the reason of fraud or collusion or any wilful misstatement or suppression of facts or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty,—

(a) the Central Excise Officer shall, within one year from the relevant date, serve notice on the person chargeable with the duty which has not been so levied or paid or which has been so short-levied or short-paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice;

(b) the person chargeable with duty may, before service of notice under clause (a), pay on the basis of,—

(i) his own ascertainment of such duty; or

(ii) duty ascertained by the Central Excise Officer, the amount of duty along with interest payable thereon under section 11AA.

(2) The person who has paid the duty under clause (b) of sub-section (1), shall inform the Central Excise Officer of such payment in writing, who, on receipt of such information, shall not serve any notice under clause (a) of that sub-section in respect of the duty so paid or any penalty leviable under the provisions of this Act or the rules made thereunder.

(3) Where the Central Excise Officer is of the opinion that the amount paid under clause (b) of sub-section (1) falls short of the amount actually payable, then, he shall proceed to issue the notice as provided for in clause (a) of that sub-section in respect of such amount which falls short of the amount actually payable in the manner specified under that sub-section and the period of one year shall be computed from the date of receipt of information under sub-section (2).

(4) Where any duty of excise has not been levied or paid or has been shortlevied or short-paid or erroneously refunded, by the reason of—

(a) fraud; or

(b) collusion; or

(c) any wilful mis-statement; or

(d) suppression of facts; or

(e) contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty,

by any person chargeable with the duty, the Central Excise Officer shall, within five years from the relevant date, serve notice on such person requiring him to show cause why he should not pay the amount specified in the notice along with interest payable thereon under section 11AA and a penalty equivalent to the duty specified in the notice.

(5) Where, during the course of any audit, investigation or verification, it is found that any duty has not been levied or paid or short-levied or short-paid or erroneously refunded for the reason mentioned in clause (a) or clause (b) or clause (c) or clause (d) or clause (e) of sub-section (4) but the details relating to the transactions are available in the specified record, then in such cases, the Central Excise Officer shall within a period of five years from the relevant date, serve a notice on the person chargeable with the duty requiring him to show cause why he should not pay the amount specified in the notice along with interest under section 11AA and penalty equivalent to fifty per cent of such duty.

(6) Any person chargeable with duty under sub-section (5), may, before service of show cause notice on him, pay the duty in full or in part, as may be accepted by him along with the interest payable thereon under section 11AA and penalty equal to one per cent of such duty per monthto be calculated from the month following the month in which such duty was payable, but not exceeding a maximum of twenty-five per cent of the duty, and inform the Central Excise Officer of such payment in writing.

7) The Central Excise Officer, on receipt of information under sub-section (6) shall—

(i)not serve any notice in respect of the amount so paid and all proceedings in respect of the said duty shall be deemed to be concluded where it is found by the Central Excise Officer that the amount of duty, interest and penalty as provided under sub-section (6) has been fully paid;

(ii)proceed for recovery of such amount if found to be short-paid in the manner specified under sub-section (1) and the period of one year shall be computed from the date of receipt of such information.

(8) In computing the period of one year referred to in clause (a) of subsection (1) or five years referred to in sub-section (4) or sub-section (5), the period during which there was any stay by an order of the court or Tribunal in respect of payment of such duty shall be excluded.

(9) Where any appellate authority or Tribunal or court concludes that the notice issued under sub-section (4) is not sustainable for the reason that the charges of fraud or collusion or any wilful mis-statement or suppression of facts or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty has not been established against the person to whom the notice was issued, the Central Excise Officer shall determine the duty of excise payable by such person for the period of one year, deeming as if the notice were issued under clause (a) of sub-section (1).

(10) The Central Excise Officer shall, after allowing the concerned person an opportunity of being heard, and after considering the representation, if any, made by such person, determine the amount of duty of excise due from such person not being in excess of the amount specified in the notice.

(11) The Central Excise Officer shall determine the amount of duty of excise under sub-section (10)—

(a) within six months from the date of notice in respect of cases falling under subsection (1);

(b) within one year from the date of notice in respect of cases falling under subsection (4) or sub-section (5).

(12) Where the appellate authority modifies the amount of duty of excise determined by the Central Excise Officer under sub-section (10), then the amount of penalties and interest under this section shall stand modified accordingly, taking into account the amount of duty of excise so modified.

(13) Where the amount as modified by the appellate authority is more than the amount determined under sub-section (10) by the Central Excise Officer, the time within which the interest or penalty is payable under this Act shall be counted from the date of the order of the appellate authority in respect of such increased amount.

(14) Where an order determining the duty of excise is passed by the Central Excise Officer under this section, the person liable to pay the said duty of excise shall pay the amount so determined along with the interest due on such amount whether or not the amount of interest is specified separately.

Explanation.—For the purposes of this section and section 11AC,—

(a) “refund” includes rebate of duty of excise on excisable goods exported out of India or on excisable materials used in the manufacture of goods which are exported out of India;

(b) “relevant date” means,—

(i) in the case of excisable goods on which duty of excise has not been levied or paid or has been short-levied or short-paid, and no periodical return as required by the provisions of this Act has been filed, the last date on which such return is required to be filed under this Act and the rules made thereunder;

(ii) in the case of excisable goods on which duty of excise has not been levied or paid or has been short-levied or short-paid and the return has been filed on due date, the date on which such return has been filed;

(iii) in any other case, the date on which duty of excise is required to be paid under this Act or the rules made thereunder;

(iv) in a case where duty of excise is provisionally assessed under this Act or the rules made thereunder, the date of adjustment of duty after the final assessment thereof;

(v) in the case of excisable goods on which duty of excise has been erroneously refunded, the date of such refund;

(c) “specified records” means records including computerised records maintained by the person chargeable with the duty in accordance with any law for the time being in force.’.

SECTION 11AA: Interest on delayed payment of duty.

(1) Notwithstanding anything contained in any judgment, decree, order or direction of the Appellate Tribunal or any court or in any other provision of this Act or the rules made thereunder, the person, who is liable to pay duty, shall, in addition to the duty, be liable to pay interest at the rate specified in sub-section (2), whether such payment is made voluntarily or after determination of the amount of duty under section 11A.

(2) Interest, at such rate not below ten per cent and not exceeding thirty-six per cent per annum, as the Central Government may, by notification in the Official Gazette, fix, shall be paid in terms of section 11A after the due date by the person liable to pay duty and such interest shall be calculated from the date on which such duty becomes due up to the date of actual payment of the amount due.

(3) Notwithstanding anything contained in sub-section (1), no interest shall be payable where,—

(a) the duty becomes payable consequent to the issue of an order, instruction or direction by the Board under section 37B; and

(b) such amount of duty is voluntarily paid in full, within forty-five days from the date of issue of such order, instruction or direction, without reserving any right to appeal against the said payment at any subsequent stage of such payment.

-------------

Issue:- Whether mere filing of appeal to High Court be grounds for issuing SCN proposing to recover refund claim sanctioned to the assessee?

Brief Facts:-

1. M/s. Mohan Sales Corporation, Behind Church, Ahmedabad (hereinafter referred to as claimant) filled a refund claim of Rs.7,75,125/- arising out of Hon’ble CESTAT, Ahmedabad order no.S/742/WZB/AHD/2008 dated 05.05.11, on 30.05.11. The refund claim of Rs.7,75,125/-was sanctioned to the claimant, ,vide OIO No.29/DC/2011-Ref Dated 9.12.11

2.       However, a Tax-Appeal against the CESTAT order No. A/742/WZB/AHD/2O11 dated 05.05.2011(on the basis of which the above said refund had been sanctioned to the claimant) was filed by the department in the Hon'ble High Court of Gujarat with stay against the operation of said CESTAT Order.

3.       Hence, a show cause notice was issued wherein it was alleged that the refund of the amount of Rs. 7,75,125/- sanctioned and paid to the Claimant appeared to be erroneous and was required to be recovered from them under the provisions of Section 11A of Central Excise Act, 1944 along with interest under provision of Section 11AA of CEA, 1944.

Appellant’s Contention:- The Appellant submitted their written reply to the Show Cause Notice wherein they stated that they had filed a consequential refund claim of Rs.7,75,125/- arising out of Order No. A/742/WZB/AHD/2O11 dated on 05.05.2011of Hon’ble Tribunal on 30.05.2011. However a tax appeal against the said order has been filed by the department     in Hon’ble High Court of Gujarat with the stay against the operation of said CESTAT order and it was submitted that the tax appeal filed by the department has been disposed off by Hon’ble High Court in their favour and so the said show cause notice is required to be quashed.

Reasoning of the Adjudicating Authority:- The learned Additional Commissioner, after considering the submissions from both the parties found that the said assessee had filed refund claim Rs. 7,75,125/-based on the Order No. A/742/WZB/AHD/2011 dated 05.05.2011 passed by the Hon’ble CESTAT, WZB, Ahmedabad in the favour of the said assessee with consequential relief. The same was sanctioned vide OIO No OIO No.-29/DC/2011-Ref dated 9.12.11 issued by the Deputy Commissioner , Central Excise, Division –iv , Ahmedabad –I.
It was also found that the Hon’ble High Court of Gujarat vide their order dated 28/8/2012 had dismissed the appeal filed by the department on the ground that in the case of determination of a case related to the rate of duty or value of goods for the purpose of assessment, an appeal would lie before the Supreme court. The order of Hon’ble High Court is accepted by the department and as such no appeal is thus preferred against the same. Thus, in light of said facts, the impugned show cause notice issued to M/s. Mohan Sales Corporation cannot survive any further.

Accordingly, the proceedings initiated against M/s. Mohan Sales Corporation Ahmedabad vide Show Cause Notice dated 10/02/2012 issued from F.No. V.39/15-8/Mohan /ADC/OA-I /2012, was dropped in light of the aforementioned order passed by the Hon’ble Gujarat High Court.

Decision:- The show cause notice was dropped.

Comment :- The case was clearly in favour of the assessee as the sole basis of issuing the show cause notice for recovery of refund granted was the appeal filed to the High Court that was dismissed by the High Court. Accordingly, the show cause notice was liable to be discharged.

*******

Comments

PJ/Case Study/2012-13/58
08 June 2013

Post a Comment

Query

Comments

PJ/Case Study/2012-13/58 08 June 2013

Post a Comment

Query

PJ/Case Study/2012-13/58
08 June 2013