Adjudicating Authority Cannot Ignore Operative CESTAT Refund Order: Delhi High Court

Welspring Universal Vs Additional Commissioner of Central GST (Delhi High Court)

Summary: The Delhi High Court allowed the writ petition filed by Welspring Universal and set aside both the Demand-cum-Show Cause Notice dated 10.12.2019 and the Order-in-Original dated 24.03.2025 confirming a demand of Rs.76,72,000/-. The controversy arose from the petitioner’s entitlement to refund of CENVAT credit under Rule 5 of the CENVAT Credit Rules, 2004. The petitioner, a partnership firm manufacturing engineering products and operating as a 100% Export Oriented Unit, had purchased goods from its sister concern and availed CENVAT credit of duty actually paid. Earlier proceedings questioning credit of Rs.35,05,894/- ultimately concluded in the petitioner’s favour before CESTAT and the Delhi High Court, and the Department accepted the High Court’s order. Separately, between April and December 2007, the petitioner exported goods through 36 consignments after paying excise duty of Rs.76,72,000/-. It initially pursued rebate under Rule 18 of the Central Excise Rules, 2002, but, following the Department’s advice, repaid rebate already sanctioned and pursued the amount through the CENVAT mechanism. Proceedings arising from a Show Cause Notice dated 03.02.2009 eventually culminated in an Order-in-Original dated 21.03.2017 dropping the proceedings, which was accepted by the Reviewing Authority.

Thereafter, the petitioner filed a refund claim for Rs.76,72,000/-, which was sanctioned on 06.05.2019. The Department challenged the refund before the Commissioner (Appeals) and, while that appeal remained pending, issued the impugned Demand-cum-Show Cause Notice dated 10.12.2019 treating the sanctioned refund as erroneous. The Commissioner (Appeals) subsequently set aside the refund order on 16.12.2019. However, CESTAT, by Final Order No.56215/2024 dated 01.08.2024, set aside that appellate order and expressly held that the petitioner was entitled to refund of Rs.76,72,000/- under Rule 5 of the CENVAT Credit Rules, 2004. CESTAT also expressly decided the limitation issue in the petitioner’s favour and held that substantive benefit could not be denied merely because the wrong rule had been quoted while claiming the refund.