Case Law Details
J K Tyre & Industries Ltd Vs Commissioner of Central Excise & Service Tax (CESTAT Bangalore)
Introduction: The case of J K Tyre & Industries Ltd vs. Commissioner of Central Excise & Service Tax, Bangalore revolves around the unilateral appropriation of an excise duty refund without providing the appellant, J K Tyre & Industries Ltd, an opportunity to present their case. The appeal challenges Order-in-Appeal No. 122/2011 passed by the Commissioner of C.E. (Appeals), Mangalore.
Background: J K Tyre & Industries Ltd, engaged in the manufacture of pneumatic tyres falling under Chapter Heading 4011 of CETA, 1985, filed a refund claim of Rs. 2,55,32,134/- following the finalization of provisional assessment for the period 01.10.2007 to 31.03.2009. The adjudicating authority accepted the refund claim, acknowledging it to be within the time limit prescribed under Section 11B of the Central Excise Act, 1944, and not subject to unjust enrichment. However, an amount of Rs. 67,15,595/- was unilaterally deducted under Section 11 of the CEA, 1944, based on a Range report indicating an outstanding due from the appellant.
Legal Arguments: The appellant, represented by their advocate, argued that the deduction of Rs. 67,15,595/- was made without issuing any notice or providing an opportunity to explain the alleged outstanding amount. They contended that the amounts mentioned in the adjudication order were erroneous, and most of the sum had already been paid by them. Specifically, they disputed the interest amount of Rs. 47,06,344/-, claiming it was not payable as the entire duty amount had been settled.
The Advocate for the Revenue failed to provide a satisfactory explanation for the inclusion of the interest amount in the deduction, relying solely on the Range Superintendent’s report mentioned in the order.
CESTAT’s Analysis and Decision: The CESTAT focused on the critical issue of whether the appropriation/deduction of Rs. 67,15,595/- from the total sanctioned refund amount of Rs. 2,55,32,134/- was justified. It noted that the deduction was based on a letter from the Range Superintendent, and no opportunity was given to the appellant to explain the veracity of the mentioned amount.
While acknowledging the authorities’ power under Section 11 of the CEA, 1944 to recover sums due, the CESTAT emphasized the need to ascertain whether the deducted amount was genuinely owed by the appellant. In this case, the tribunal found that the authorities had not provided an opportunity to the appellant to contest the validity of the deduction.
Consequently, the CESTAT ordered a remand, directing the matter back to the adjudicating authority. The adjudicating authority was instructed to examine in detail, considering the submissions of the appellant, whether the deducted amount of Rs. 67,15,595/- was genuinely due to the government and, therefore, deductible from the refund amount. The timeline for the disposal of the case was set at four months from the date of communication of this order.
Conclusion: The decision in J K Tyre vs. Commissioner underscores the importance of providing appellants with an opportunity to contest deductions made by authorities, especially when based on unilateral reports. This case highlights the procedural requirement of ascertaining the actual dues before appropriating amounts during excise duty refund proceedings.
FULL TEXT OF THE CESTAT BANGALORE ORDER
This is an appeal against Order-in-Appeal No. 122/2011 passed by the Commissioner of C.E. (Appeals), Mangalore.
2. Briefly stated facts of the case are that the appellant are engaged in manufacture of pneumatic tyres falling under Chapter Heading 4011 of CETA, 1985. They have filed a refund claim of Rs.2,55,32,134/- consequent to finalization of their provisional assessment for the period 01.10.2007 to 31.03.2009. The adjudicating authority considered the refund claim and held that the same is within the time limit prescribed under the Section 11B of the Central Excise Act, 1944 and also not hit the bar of unjust enrichment. Consequently, the adjudicating authority has held that the appellant are eligible for cash refund of Rs.74,04,319/- and credit in their Cenvat account of Rs.1,81,27,815/-. However, the adjudicating authority has deducted an amount of Rs.67,15,595/-under Section 11 of the CEA, 1944 on the basis of Range report observing that the said amount was due from the appellant. Aggrieved by the said order, the appellant filed the appeal before the ld. Commissioner (Appeals), who in turn rejected their appeal. Hence, the present appeal.
3. At the outset, the ld. Advocate for the appellant submits that the deduction/appropriation of the amount of Rs.67,15,595/-was made unilaterally without issuing any notice to them before the adjudication order was passed. He submits that the amounts mentioned at para 12 of the adjudication order are totally erroneous and most of the amount has already been paid by them. It is his contention that the interest amount of Rs.47,06,344/-calculated for the period from 1996 to 2001 itself is not payable as entire amount of duty has been paid by them.
4. The ld. AR for the Revenue also could not explain why the interest amount of Rs.47,06,344/- has been shown as due and deducted from the refund amount, except the report of Range Superintendent mentioned in the order.
5. Heard both sides and perused the records.
6. We find that the only issue in the present appeal for determination is: whether appropriation/deduction of the amount of Rs.67,15,595/- from the total sanctioned refund amount of Rs.2,55,32,134/- by the authorities below is justified.
7. We find that at para 12 of the order of adjudicating authority on the basis of a letter of the Range Superintendent, the said amount has been deducted from the total refund amount sanctioned. No opportunity was given to the appellant to to explain whether the amount mentioned in the said para, has already been paid or otherwise. Even though, the provision laid down under Section 11 of the CEA, 1944 empowers the lower authorities to recover sums due from the appellant, however, whether the said amount is due or otherwise, is to be ascertained before deducting the same. In the present case, we find that the same has not been done by providing an opportunity to the appellant. In these circumstances, it is appropriate to remand the matter to the adjudicating authority to examine in detail taking note of the submissions of the appellant that the deducted amount of Rs.67,15,595/- is not due to the government, hence, not deductable from the refund amount. Since, the refund is of the year 2009-10, it is directed that the case be disposed of within four months from the date of communication of this order. The appeal is disposed of by way of remand.
(Dictated and pronounced in the open court)
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