CESTAT Mumbai orders Pre-deposit refund verification, remanded case for fresh proceedings

Shiva Steel Industries (Nagpur) Ltd. Vs Commissioner of Central Excise & GST (CESTAT Mumbai)

The impugned order is modified to the extent of allowing the appeal filed by the appellant in respect of refund of Rs.24 lakhs to be subjected to a process of verification in the de novo proceedings by the original authority.

Hence, for the limited extent of verification of the documents submitted in support of the claim for having made the pre-deposit by the appellant and to decide the issue of refund of pre-deposit of Rs.24 lakhs, I deem it necessary to remand the case back to the original authority for fresh fact finding and for passing a speaking order. Needless to state that reasonable opportunity for personal hearing should be given to the appellant to produce the document relating to their claim and any other documents, which the Department may require to cross-verify the pre-deposit of Rs.24 lakhs in the Government account.

8. As regards the claim for interest from the date of deposit till the date of refund, I find that the issue has been examined in detail and considering the factual position that the refund has been granted within three months time in respect of the sanctioned amount of Rs.2,50,61,298/-, I do not find any infirmity in the order passed by the Commissioner (Appeals).

The matter was argued by Ld. Counsel Mahesh Raichandani

FULL TEXT OF THE CESTAT MUMBAI ORDER

Refund of pre-deposit made by the appellant involving an amount of Rs.24 lakhs paid during February 2004, March 2004, May 2004 and May 2008 is the issue in dispute. The appellant has filed this appeal seeking refund of said pre-deposit as the issues under dispute had attained finality with the passing of Final Order No. A/88363 – 86366/2019 dated 07.08.2019 by this Tribunal, wherein the impugned orders passed by authorities below in confirmation of the duty demands were set aside. The appellant also sought for payment of interest on the entire amount of pre-deposits made during the investigation till the date of its payment. The aforesaid issue was adjudicated by allowing refund of part of the pre-deposit amount and by rejecting the other part of refund amount claimed by the appellant by the Assistant Commissioner of Central Excise, Nagpur vide Order-in-Original dated 18.09.2019. Being aggrieved with the above order, the appellants filed an appeal before the learned Commissioner (Appeals), Nagpur, who in deciding the issue in Order-in-Appeal dated 08.03.2021 (for short referred to as “the impugned order”) had upheld the order of the original authority and rejected the appeal filed by the appellant.

2. I have heard arguments advanced by both sides and perused the case records along with the paper books filed by both sides.

3. The primary issue arising in this dispute relates to alleged clandestine production and clearance of ‘mild steel ingots’ on the basis of investigation conducted by the Central Excise authorities, Nagpur. Upon completion of the investigation, two show-cause notices were issued; and the matter was adjudicated by the Commissioner of Central Excise, Nagpur in confirming the demands raised in the SCN for total duty of Rs.10,02,45,193/- vide orders dated 01.06.2009 and 31.12.2019, besides imposition of penalty on the appellant and the Director of the appellant firm and appropriated the amount of Rs.4,98,952/-. During the pendency of the dispute before various forums, the appellant had paid pre-deposit of 25% of the duty confirmed in the Orders-in-Original on the basis of judgement dated 23.11.2011 of the Hon’ble Bombay High Court.

4. In original order dated 18.09.2019, passed by the Assistant Commissioner of Central Excise, Nagpur, the issue relating to refund of pre-deposit have been examined by him and it is recorded in the said order as follows: –

“4. The issue involved in the case in brief is as under:

During investigation by preventive, it was noticed that the noticee had suppressed the production and clearance of the finished goods based on the premise of electricity consumption. As such SCN’s were issued and adjudicated vide O-I-O no. 3/2009/C dtd. 01.06.2009, 34/2009/C dtd. 31.12.2009 confirming duty of Rs.7,99,91,522/- and Rs. 2,02,53,671/- alongwith interest and penalty, respectively.

Being aggrieved by the said Order-In-Originals party has filed an appeal before the (before the) CESTAT, Mumbai. CESTAT, Mumbai vide their Order No A/86363-86366/2019 DTD 07/08/2019 CESTAT, allowed party’s appeal and set aside the Order-in-Original No. 3/2009/C dtd. 01.06.2009, & Order-in-Original No. 34/2009/C dtd. 31.12.2009.

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The claimant then submitted their reply on 13.09.2019 wherein they submitted that the claim is filed for Rs. 2,50,61,298/- (i.e. 25% of Duty demanded in OIO no. 3/2009/C and 34/2009/C) along with interest. They also submitted that the challan wise payment of Rs. 3,00,10,950/- was made by 15.06.2012 in respect of three orders. 1.O-I-O No. 03/2009/C, 2. O-I-O 37-86/2009 and 3. O-I-O 34/2009/C, out of which Rs. 2,50,61,298/- was made in respect of orders O-I-O No. 03/2009/C, and 34/2009/C. They also submitted copy of Hon’ble High Court (HC) order dtd. 23.11.2011 in appeal no. 60/2011,64/2011,71/2011,72/2011 directing to make pre-deposit of 25% amount. As such the Refund Claim alongwith all the relevant documents is received in this office 13.09.2019.

The Refund Claim was sent to the Range Officer, Range-Kamptee for verification and comments. The Superintendent, Range-Kamptee, Nagpur vide his letter C.No. CGST/R-KMT/Refund/19/2019 dated 17/09/2019 submitted that, the duty amount involved in both the cases is Rs. 10,02,45,193/- and the assessee has deposited 25%of the duty amount of Rs. 2,50,61,298/-. The payment details are verified from GSTN and found correct. There are no Govt. dues outstanding against the party.

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13. From the provision (a) it is clear that, the issues like Time Bar of Refund Claim, Unjust Enrichment to be verified in normal Refund claim filed under Section 11B of the Central Excise Act, 1944, are need not to be verified in case of Refund of Pre-deposit.

14. In view of the above I find that, the claimant is entitled for Refund of Rs. 2,50,61,298/ and the differential amount of Rs.75,77,783/- (Rs. 3,26,39,081/- minus Rs. 2,50,61,298/-) is inadmissible and is liable to be rejected as the said amount is not relevant with the O-I-O No. 3/2009/C dtd. 01.06.2009 & 34/2009/C dtd. 31.12.2009 which were decided Vide CESTAT order A/86363­86366/2019 dtd. 07/08/2019.

15. The claimant has claimed refund of Rs. 2,50,61,298/-. I find that, Section 35FF of Central Excise Act, 1944 and the provisions made in the Circular No.984/08/2014-CX dated 16.09.2014 (already stated above) allows Interest on the amount of pre-deposit made under Section 35F of Central Excise Act, 1944.

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ORDER

(i) I sanction the refund of refund of pre-deposit amounting to Rs.2,50,61,298/- (Rs. Two Crores Fifty Lakh Sixty one thousand Two hundred Ninety Eight only) to the claimant under Section 11B of Central Excise Act, 1944 read with Section 142 of CGST Act, 2017.

(ii) I reject the refund of pre-deposit amounting to Rs.75,77,783/-(Rs. Seventy Five Lakh Seventy Seven thousand Seven hundred Eighty Three only) to the claimant under Section 11 B of Central Excise Act, 1944 read with Section 142 of CGST Act, 2017.”

From the above, I find that the original authority has refunded 25% of the duty paid as pre-deposit pursuant to the judgement of the Hon’ble Bombay High Court. However, the original authority had rejected the balance amount of pre-deposit claimed by the appellant as being not properly substantiated to have been eligible for refund being the pre-deposit paid by them. Further, in the appeal filed by the appellant, learned Commissioner (Appeals) had dealt with the issue in detail as follows:-

“26. From the analysis of records of the Anti-evasion including orders-in-original, CESTAT orders and the orders of Hon’ble High Court of Bombay permanent bench at Nagpur, I find that following points are very important in this case:

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(iv) From scrutiny of the documents, I don’t find the mention of any pre-deposit amount of Rs.24,00,000/- as claimed by the appellant in this appeal in any of the documents including show cause notices and orders-in-original, except an amount of Rs.4,00,088/- in the O.I.O. No. 3/2009/C date 01/06/2009 and Rs.98,684/- in the O.I.O No. 34/2009 date 31/12/2009. In other words, an amount of total Rs.4,98,952/- only has been mentioned in both the orders-in-original and the same has been appropriated also against the total demand.

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(vi) When the Hon’ble CESTAT, Mumbai granted stay against the orders-in-original dated 01/06/2009 and 13/12/2009 on the conditions that the appellant will deposit 50% of the duty amount and the 25% of the penalty amount, the appellant had not brought into the notice of the CESTAT, Mumbai that they have already deposited Rs.24,00,000/-during the course of investigation itself, if at all such additional deposit has been made by them.

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(ix) During the routine course of time, any assessee deposit amount in Government head due to various reasons. They may deposit in compliance of audit objection, outcome of scrutiny of returns by the field officers, for arrears of revenue amount, for payment of duty liability and also investigation proceedings. During the period of 2004­2008, P.L.A. register was maintained wherein the assessee credit the amount deposit made by T.R 6 challan, for regular payment of duty and other items including arrears of amount etc. It is possible that the appellant might have deposited some amount during that period for some other purpose but now claiming that amount as refund treating them as deposit made during the course of investigation is not legal and proper.

27. (i) In view of above, it can be concluded that the refund claim of Rs.24,00,000/- of the appellant is nowhere connected to the impugned case. The CESTAT Mumbai vide order dated 07/08/2019 has set aside two orders-in-original dated 01/06/2009 and 31/12/2009 and consequently, the pre deposit of Rs.2,50,61,298/- made by the appellant had become liable to be refunded. The lower authority, in compliance of the said CESTAT order already sanctioned the pre-deposit amount of Rs.2,50,61,298/- as reflected in the impugned order. Thus, I come to the conclusion that no additional amount has been deposited by the appellant in this case and neither they are entitled to single penny in excess and above of Rs.2,50,61,298/-. Therefore, the claim of refund of Rs.24,00,000/- is not legal and proper and not substantiated by documentary evidence, hence rejected.

(ii) The case Laws cited by the appellant are not relevant in this case as the deposit of Rs.24,00,000/- in addition to sanctioned amount, has not been proved deposited relating to this case, during the course of investigation.

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(vi) In this case, the CESTAT, Mumbai passed the Final order No: A/86363-86366/2019 dated 07.08.2019, and the Lower Authority has granted consequential refund on 19.09.2019, which is well within 3 months’ time prescribed as per Section 11B and 11BB of Central Excise Act, 1944 read with Section 35FF of the Central Excise Act, 1944 relevant during that time.

(vii) In view of above, the Lower Authority has rightly not thought fit to consider the interest on the sanctioned amount of refund Rs.2,50,61,298/-

31. Keeping in view of the above discussions. I pass the following order:

ORDER

I uphold the Order-in-Original No.33/Ref/Dn-Kal/2019-20 dated 19.09.2019 passed by the Assistant Commissioner CGST & Central Excise, Division Kalmeshwar Nagpur-II Commissionerate and reject the appeal of the appeal of the appeal of the appellant.”

5. During the hearing and as a part of the appeal papers, the learned Advocate for the appellant referred to the letter of the appellant dated 27.12.2005 addressed to the Superintendent, Central Excise Range-Kamptee, Division-II, Nagpur informing that they had paid an amount of Rs.22 lakhs as per the oral direction of the Central Excise Preventive Department, who conducted investigation against the appellant by visiting their unit on 12.12.2004. Further, it is also submitted by the learned Advocate for the appellants that they had paid an amount of Rs.2 lakhs on 20.05.2008 and informed the same vide their letter dated 05.06.2008 addressed to the Assistant Commissioner (Preventive), Central Excise, Nagpur that such payment has been made on account of interest liability against ongoing investigation regarding clearance of excisable goods. On perusal of the TR-6 challans and the letters addressed to the Department, it appears that the signed acknowledgement of dates 27.12.2005 and 05.06.2008 was given by the Department in receipt of such letters dated 27.12.2005 and 05.06.2008. Further, the certificate of the Chartered Accountant certifying that an amount of Rs.24 lakhs have been paid as pre-deposit and the same is shown as deposit and advance in the Balance-sheet in order to claim its refund from the Department shows the accounting treatment of such amounts paid to the department. On perusal of the above documents, it is clear that the appellant had paid pre-deposit during the period of investigation. However, the same amount has not been reflected either in the show-cause notice or in the adjudication proceedings. Though, the learned Commissioner (Appeals) has held this against the appellant, the laid down principles of taxation is that any tax is to be collected only with the authority of law. Therefore, if any amount has been paid as pre-deposit, not being related to any excise duty payable against any specific excisable goods cleared for home consumption, then such deposit is required to be adjusted against the duty liability. The procedure followed either in the erstwhile PLA by cash payment or by debiting of CENVAT Credit available in the account is only against specific duty liability. Thus, such pre-deposit not finding mention in any of the disputed proceedings cannot absolve the Department for treating it as duty payment made against any specific demand or with respect to clearance of goods in the past.

6.. I further find that the jurisdictional Range Officer, Kamptee Range has found it verifiable with the departmental records, and had reported that the pre-deposit paid by the appellant to the extent of 25% of the duty amount paid by the appellant pursuant to the judgment of Hon’ble Bombay High Court is correct. However, the said exercise of verification of the pre-deposit of Rs.24 lakhs has not been done by the Department in the same manner they had done for verification of 25% of the duty amount. In fact the appellants have produced the TR6 Challans through which such payments were made as follows:

7. From the above factual evidence and the then existing mission of Central Board of Excise & Customs (CBEC) is, inter alia, to provide an efficient system by realizing revenue in a fair, equitable, transparent and efficient manner, it is a necessary responsibility for the field formation of CBEC-tax department, to lay down the specific ground on which the pre-deposit paid, is either eligible or not eligible to the assessee as refund. Inasmuch as the basic details produced by the appellant have not been verified to come to a conclusion, whether such pre-deposit can be refunded or not in terms of the legal provisions of Central Excise Act, 1944, there is a need that such exercise is to be undertaken by the jurisdictional authorities. Hence, for the limited extent of verification of the documents submitted in support of the claim for having made the pre-deposit by the appellant and to decide the issue of refund of pre-deposit of Rs.24 lakhs, I deem it necessary to remand the case back to the original authority for fresh fact finding and for passing a speaking order. Needless to state that reasonable opportunity for personal hearing should be given to the appellant to produce the document relating to their claim and any other documents, which the Department may require to cross-verify the pre-deposit of Rs.24 lakhs in the Government account.

8. As regards the claim for interest from the date of deposit till the date of refund, I find that the issue has been examined in detail and considering the factual position that the refund has been granted within three months time in respect of the sanctioned amount of Rs.2,50,61,298/-, I do not find any infirmity in the order passed by the Commissioner (Appeals).

9. In the result, the impugned order is modified to the extent of allowing the appeal filed by the appellant in respect of refund of Rs.24 lakhs to be subjected to a process of verification in the de novo proceedings by the original authority.

(Order pronounced in open court on 04.09.2024)