Once the adjudication order to pay duty is set aside, sums paid in pursuance of the said order, would be automatically refundable

Commissioner of Central Excise, Bangalore-III Vs. Multiplex Fertilizers (P.) Ltd. [(2014) 47 taxmann.com 359 (High Court of Karnataka)]

Multiplex Fertilizers Pvt. Ltd. (“the Respondent”) filed an application for refund of the amount paid in pursuance of the order of the Adjudicating Authority (“AA”) which was set aside by the Tribunal holding that the Respondent wasn’t liable to pay duty (“the Main Order”).

The AA denied the refund claim on the basis of unjust enrichment.

Being aggrieved,the Respondent challenged the order of the AA denying the refund claim, before the Commissioner (Appeals) who allowed the appeal and directed the refund. Further it was challenged before the Tribunal which was also dismissed (“the Refund Order”).

Further, the Department filed an appeal before the Hon’ble High Court against the Refund Order of the Tribunal to grant the refund to the Respondent on the premise that since the AA was yet to adjudicate the refund claim, the amount shall not be refunded.

The Hon’ble High Court held that once order to pay duty was set aside, the refund is automatic. Refusal of refund on the basis that the exigibility of tax  is yet to be adjudicated was not a valid reason.

Accordingly, once the Commissioner (Appeals)  held that there was no unjust enrichment, the Respondent would be entitled to get back duty, interest, penalty paid in pursuance of an earlier order of the AA.

(Bimal Jain, FCA, FCS, LLB, B.Com (Hons), Mobile: +91 9810604563, Email: bimaljain@hotmail.com)

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October 2020