Case Law Details
Galaxy Match Company Vs Commissioner of GST and Central Excise (CESTAT Chennai)
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chennai, dismissed an appeal challenging rejection of a refund claim on the ground of limitation under Section 11B of the Central Excise Act, 1944. The appellant, engaged in manufacture of excisable goods, was subjected to investigation alleging suppression of production and clandestine removal. During investigation, prior to issuance of show cause notice, the appellant made payments of ₹5,00,000 and ₹3,00,000. Subsequently, adjudication confirmed duty, interest, and penalty, and the amounts paid were appropriated.
On appeal, the Commissioner (Appeals) substantially reduced the duty demand, resulting in excess payment. The Department’s further appeal was withdrawn and dismissed, leading the appellant to file a refund claim in 2016 for the excess amount. However, the refund was rejected as time-barred, and this rejection was upheld in the impugned order.
The Tribunal examined whether payments made during investigation retained the character of deposits or became duty after adjudication. It observed that payments made prior to determination of liability are in the nature of deposits. However, once adjudication is completed and amounts are appropriated towards confirmed demand, they assume the character of duty. The Tribunal held that in this case, the payments lost their character as deposits upon appropriation in the adjudication order and became duty.
The Tribunal further considered whether the refund claim was barred by limitation. It noted that under Section 11B, a refund claim must be filed within one year from the “relevant date.” Where refund arises due to an appellate order, the relevant date is the date of that order. In this case, the right to refund arose from the Order-in-Appeal dated 25.01.2012, which reduced the duty demand.
The appellant argued that limitation should be computed from the date of final disposal of the Department’s appeal by the Tribunal. However, the Tribunal rejected this contention, holding that the statute does not permit postponement of limitation due to pendency of further appeals. Once the appellate order grants relief, the right to claim refund accrues immediately, and limitation begins from that date.
The Tribunal also rejected the argument that cross-objections filed by the appellant could extend the limitation period. It held that cross-objections are contingent on the main appeal and do not create an independent cause of action. Since the Tribunal did not pass any fresh order granting relief, the relevant date remained the earlier appellate order.
Further, the Tribunal held that even amounts representing penalty, once appropriated in adjudication, are governed by Section 11B for refund purposes. Therefore, limitation applies uniformly.
As the refund claim was filed on 26.10.2016, well beyond one year from the Order-in-Appeal dated 25.01.2012, it was held to be time-barred. The Tribunal concluded that the impugned order rejecting the refund was legally valid and dismissed the appeal.
FULL TEXT OF THE CESTAT CHENNAI ORDER
This appeal is directed against Order-in-Appeal No. 117/2018 dated 28.03.2018 passed by the Commissioner (Appeals), Coimbatore, whereby Order-in-Original No. 7/CE/AC/2017 dated 13.04.2017 (hereinafter referred to as “the impugned order”) rejecting the refund claim filed by the appellant on the ground of limitation under Section 11B of the Central Excise Act, 1944 has been upheld.
1.2 The facts, briefly stated, are that the appellant, M/s. Galaxy Match Company, Srivilliputhur, is engaged in the manufacture of safety matches falling under Chapter 36 of the Central Excise Tariff Act, 1985. Based on intelligence, officers of DGCEI conducted searches and alleged suppression of production and clandestine removal of excisable goods, resulting in issuance of a show cause notice dated 10.12.2008 proposing demand of duty. During the course of investigation, even prior to issuance of the show cause notice, the appellant paid amounts of Rs.5,00,000/- on 01.10.2007 and Rs.3,00,000/- on 05.12. 2007.Subsequently, adjudication culminated in confirmation of demand along with interest and penalty vide Order-in-Original dated 15.02.2011. The appellant discharged the amounts as determined therein. On appeal, the Commissioner (Appeals), vide Order-in-Appeal dated 25.01.2012, substantially reduced the duty demand to Rs.38,870/- with corresponding modification of penalty, thereby resulting in excess payment by the appellant.
1.3 The Department preferred an appeal before this Tribunal against the said Order-in-Appeal; however, the same was subsequently withdrawn and dismissed vide Final Order dated 18.08.2016. Consequent upon the reduction of demand and attainment of finality of proceedings, the appellant filed a refund claim on 26.10.2016 for Rs.12,80,456/- (subsequently restricted to Rs.12,63,056/-). The refund claim was rejected by the adjudicating authority as time-barred under Section 11B of the Central Excise Act, 1944, and the said rejection has been upheld in the impugned Order-in-Appeal.
2. Aggrieved by the aforesaid OIA, the appellant is in Appeal before this Tribunal.
3. The Ld. Advocate Shri B. Ganesan, appeared on behalf of the Appellant. The Ld. Authorized Representative Ms. Anandalakshmi Ganeshram, appeared for the Revenue.
4. The Learned Counsel for the Appellant submitted that: –
i. the amounts paid during investigation cannot be treated as “duty” but are in the nature of deposits made under protest. It is contended that payments made prior to issuance of show cause notice, particularly at the instance of departmental officers, partake the character of deposit and not duty.
ii. It was further argued that such payments are deemed to be under protest and therefore the limitation prescribed under Section 11B is not applicable. Reliance is placed on the decision in USV Ltd. vs CCE, 2016 (45) S.T.R. 83 (Tri.-Mumbai), wherein it has been held that the relevant date for limitation would arise only upon adjudication and not at the time of deposit.
iii. It was also contended that payments made during investigation are deemed to be under protest. Reliance is placed on Opel Alloys Pvt Ltd vs CCE, 2010 (249) ELT 408 (Tri.-Del.), G.S. Radiators Ltd vs CCE, 2005 (179) ELT 222 (Tri.-Del.) and Bajaj Auto Ltd vs CCE, 2007 (6) STR 356 (Tri.-Mumbai), wherein it has been consistently held that limitation does not apply to amounts paid under protest.
iv. The appellant further submitted that duty paid during pendency of appeal is also to be treated as payment under protest and limitation would not apply. Reliance is placed on the judgment of the Hon’ble Supreme Court in Mafatlal Industries Ltd. vs. Union of India, 1997 (89) ELT 247 (SC).
v. It was further argued that no separate letter of protest is required when payment is made during pendency of appeal and reliance is placed on various Tribunal decisions.
vi. The appellant also relied upon Mahanagar Telephone Nigam Ltd vs CST, Delhi, 2017 (48) STR 241 (Tri.-Del.) wherein it has been held that refund consequent to appellate order cannot be rejected on limitation and relevant date would be the date of final adjudication.
5. Per Contra, the Ld. Authorized Representative reiterated the findings of the lower authorities and further submitted that: –
i. the refund claim has been filed beyond the period of one year from the relevant date as prescribed under Section 11B.
ii. the relevant date in the present case is the date of Order-in-Appeal dated 25.01.2012 and since the refund claim has been filed only on 26.10.2016, the same is clearly time-barred.
iii. Reliance was placed on the decision in Rachna Art Prints Pvt Ltd vs CCE, 2022 (1) Centax 320 (Tri.-Ahmd), wherein it has been held that once an amount is appropriated towards confirmed demand, it takes the character of duty and limitation under Section 11B applies.
iv. Further reliance was placed on Citizen Metalloys Ltd vs CCE, 2022 (379) ELT 361 (Tri.-Ahmd), wherein it has been held that refund claims filed beyond one year from the date of final order are time-barred.
6. We have carefully heard the submissions advanced by both sides, examined the appeal records in detail, and considered the statutory provisions and the case laws cited.
7. Upon consideration the following questions arise.
i. Whether the amounts paid by the appellant during investigation and adjudication are to be treated as “duty” or as “deposit under protest”.
ii. Whether the refund claim is barred by limitation under Section 11B and consequently whether the appellant is entitled to refund.
8. We now proceed to examine the issues arising for determination in the present appeal, one by one, seriatim.
ISSUE (i): Nature of payment – whether duty or deposit
9.1 The issue that arises for consideration is whether the amounts paid by the appellant during investigation and subsequent stages are to be treated as “duty” or as “deposit under protest”. This determination is relevant for deciding the applicability of limitation under Section 11B of the Central Excise Act, 1944.
9.2 It is not in dispute that certain amounts were paid by the appellant during the course of investigation, prior to issuance of show cause notice. It is a settled principle that payments made during investigation, prior to determination of liability, are in the nature of deposits and do not partake the character of duty at that stage.
9.3 In this regard, the appellant has relied upon decisions such as USV Ltd. vs CCE, 2016 (45) S.T.R. 83 (Tri.-Mumbai), Opel Alloys Pvt. Ltd. vs CCE, 2010 (249) E.L.T. 408 (Tri.-Del.), and G.S. Radiators Ltd. vs CCE, 2005 (179) E.L.T. 222 (Tri.-Del.), wherein it has been held that payments made during investigation or pendency of dispute are to be treated as deposits under protest. The ratio decidendi of these decisions is that prior to adjudication, the liability is not crystallized and therefore such payments do not assume the character of duty.
9.4 However, the legal position undergoes a change once adjudication is completed. In the present case, the amounts paid by the appellant stood appropriated towards duty, interest and penalty in the Order-in-Original dated 15.02.2011. Upon such appropriation, the payments ceased to retain the character of deposits and assumed the character of duty in terms of the adjudicated liability.
9.5 The decisions relied upon by the Department in Rachna Art Prints Pvt. Ltd. vs CCE, 2022 (1) Centax 320 (Tri.-Ahmd.), and Citizen Metalloys Ltd. vs CCE, 2022 (379) E.L.T. 361 (Tri.-Ahmd.), support the proposition that once amounts are appropriated against confirmed demand and the liability attains a stage of determination, such amounts assume the character of duty and are governed by the provisions of Section 11B. The ratio of these decisions is that upon crystallization of liability, the nature of payment changes from deposit to duty.
9.6 In the present case, therefore, while the amounts paid during investigation may initially have been in the nature of deposits, the same stood appropriated upon adjudication and assumed the character of duty. The subsequent modification of demand at the appellate stage does not alter the character of such payments as duty, but only gives rise to a claim for refund of the excess amount in accordance with Section 11B of the Act.
9.7 Accordingly, we hold that the amounts paid by the appellant, upon appropriation in the Order-in-Original, are to be treated as duty and not as deposits.
ISSUE (ii): Whether the refund claim is barred by limitation under Section 11B and consequently whether the appellant is entitled to refund
10.1 First, we have to observe that it is not disputed
that the appellant though has not filed any formal refund application as the record reveals, not even a letter was sent to the Refund Sanctioning Authority after passing of the Commissioner (Appeals) order dated 25.01.2012 in his favor which is unfortunate.
10.2 Further, we note that Section 11B of the Central Excise Act, 1944 provides that a claim for refund is required to be filed within one year from the relevant date. The expression “relevant date” has been defined under Explanation (B) to the said section.
10.3 Clause (ec) of Explanation (B) to Section 11B provides that in a case where the duty becomes refundable as a consequence of a judgment, decree, order or direction of an appellate authority, Appellate Tribunal or any court, the “relevant date” shall be the date of such judgment, decree, order or direction.
10.4 A plain reading of the above provision makes it abundantly clear that where a refund arises as a consequence of an appellate order, the starting point of limitation is the date of such order itself. The statute thus clearly contemplates that the right to claim refund accrues immediately upon the passing of the appellate order which grants relief to the assessee.
10.5 In the present case, the refund arose consequent to the Order-in-Appeal dated 25.01.2012, whereby the demand confirmed in the Order-in-Original was substantially reduced. Therefore, in terms of the statutory mandate under Section 11B, the relevant date for the purpose of computing limitation is the date of the said Order-in-Appeal.
10.6 The contention that limitation should be reckoned from the date of disposal of the Department’s appeal by this Tribunal cannot be accepted. The statute does not provide for postponement of the relevant date on account of pendency of further appeal. Once an appellate order gives rise to a refund, the limitation begins to run from that date, irrespective of whether such order is further challenged. The pendency of an appeal cannot override the statutory prescription of limitation unless expressly provided by law.
10.7 The appellant has relied upon Mahanagar Telephone Nigam Ltd. vs CST, Delhi, 2017 (48) S.T.R. 241 (Tri.-Del.), to contend that limitation should be computed from the stage when the dispute attains finality. However, the said decision is distinguishable. In that case, the dispute was carried through successive appellate stages at the instance of the assessee and the refund claim arose only upon final resolution of the dispute. In the present case, the appellant had already obtained a favourable Order-in-Appeal dated 25.01.2012, giving rise to a clear and enforceable right to claim refund. The appellant was not precluded from filing the refund claim at that stage. Therefore, the ratio of the said decision is not applicable.
10.8 The reliance placed on the judgment of the Hon’ble Supreme Court in West Coast Paper Mills Ltd. vs CCE, 2004 (164) E.L.T. 375 (S.C.), is also misplaced. In the said case, the right to claim refund arose only upon final adjudication of the dispute and the assessee could not have claimed refund at an earlier stage. In the present case, however, the right to refund had already accrued upon passing of the Order-in-Appeal. Therefore, the principle laid down in the said judgment cannot be extended to defer the limitation prescribed under Section 11B.
10.9 The appellant has further contended that since the Department had preferred an appeal before this Tribunal and the appellant had filed cross-objections, which were also taken note of in the final order of this Tribunal while dismissing the Department’s appeal, the said order of the Tribunal should be treated as the relevant order for the purpose of Section 11B. However, this contention cannot be accepted. The Order-in-Appeal dated 25.01.2012 had already granted relief to the appellant, thereby giving rise to a clear and enforceable right to claim refund. The filing of cross-objections by the appellant was only in response to the Department’s appeal and was not in the nature of an independent proceeding giving rise to a fresh cause of action.
10.10 It is also necessary to examine the effect of the cross-objections filed by the appellant under Section 35B(4) of the Central Excise Act, 1944. Though the said provision enables a respondent to file cross-objections and treats the same procedurally as an appeal, such cross-objections are essentially in the nature of a defensive remedy and are contingent upon the existence of the main appeal. In the present case, the cross-objections filed by the appellant were only in response to the Department’s appeal and were not adjudicated on merits. The appeal filed by the Department having been dismissed as withdrawn on account of monetary limits, the Tribunal did not pass any order determining the duty liability afresh or granting any relief to the appellant.
10.11 In these circumstances, it cannot be said that the refund arose as a consequence of the order of this Tribunal. The mere filing or reference to cross-objections in the Tribunal’s order does not create a fresh cause of action or extend the limitation prescribed under Section 11B. A cross-objection, being contingent upon the main appeal, cannot independently confer a right to refund nor can it alter the statutory limitation. Therefore, the provisions of Explanation (B)(ec) to Section 11B apply with reference to the Order-in-Appeal dated 25.01.2012 and not the subsequent order of this Tribunal.
10.12 The appellant has also relied upon the decision in CCE vs BS Fibre Foils Pvt Ltd, 2000 (122) E.L.T. 640 (Tri.), to contend that limitation under Section 11B is not applicable to refund of penalty. While the said decision observes that Section 11B refers to duty and does not expressly mention penalty, the same cannot be applied in the facts of the present case.
10.13 In the present case, the penalty amount stood appropriated in the Order-in-Original and formed part of the adjudicated liability under the Act. Once such amount is recovered and appropriated in terms of adjudication, the refund thereof is governed by the general provisions relating to refund under Section 11B. The said decision does not deal with a situation where penalty has been appropriated pursuant to adjudication and refund arises consequent to appellate modification of such liability. Therefore, the ratio of the decision in BS Fibre Foils Pvt. Ltd. is distinguishable and does not advance the case of the appellant.
10.14 Accordingly, we hold that the refund claim filed by the appellant is barred by limitation under Section 11B.
11. In view of the foregoing discussion, we hold that the relevant date for the purpose of limitation is the date of the Order-in-Appeal dated 25.01.2012, from which the right to claim refund accrued to the appellant. The refund claim having been filed beyond the prescribed period of one-year i.e. on 26.10.2016 is clearly barred by limitation. Consequently, the impugned Order-in-Appeal No. 117/2018 dated 28.03.2018 is upheld and the appeal filed by the appellant is dismissed.
(Order pronounced in open court on 13.04.2026)
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