Government of India
Ministry of Finance
Department of Revenue, CBEC, New Delhi
Subject: Whether erroneous refund granted could be recovered by raising a demand under Section 11-A or Section 35E provides an avenue to the Department for recovery – Clarification regarding.
Certain doubts have been raised regarding whether the erroneous refunds granted could be recovered by recourse to review under Section 35-E of the Central Excise Act or demands under Section 11A within the statutory time limit as laid down.
The SC in the case of CCE Vs. Re-rolling Mills (reported in 1997 (94) ELT 8 (SC) has inter alia held as following.
“The learned Counsel for the parties do not dispute that this appeal is covered by the decision of this Court in Union of India & Ors. Vs. Jain Shudh Vanaspati Ltd. & Anr. 1996 (86) ELT 460 (SC) = (1996) 10 SCC 320. IN that case the court was dealing with Section 28 of the Customs Act which is in parimateria with Section 11A of the Central Excise Act. The said decision is thus applicable to the present case also. For the reasons given in the said judgement, the appeal is dismissed”. In this context the point to be stressed is that the Order passed U/S 35-E(2) does not automatically result in the recovery of the refund. This has to be followed by SCN U/S 11A which should be issued within 6 months from the date of actual refund. Since time limit for filling appeal U/S 35E(2) is longer than the time limit prescribed US 11A, the SCN, the SCN should preceed the proceedings U/S 35-E(2).
This view has been supported by the opinion of the Law Ministry. The Law Ministry vide F.No. 387/78/98-JC has opined thus, “In view of the judgement of the Apex Court in CCE Vs. Re-rolling Mills [1997 (94) ELT 8] dismissing the appeal preferred by the Department against the CEGAT order, the order passed by the Tribunal on 27.1.98 in the present case of M/s Fag Precision Bearing Ltd. reflects the correct legal position. We, therefore, agree with the view of the referring Department that the demand for recovery of erroneous refund has to be made U/S 11A of the Central Excise Act, 1944 within the prescribed limitation period”.
In view of above it is clarified that timely demands should invariably be raised (within six months normal period) under Section 11A the Act.