2025 (6) TMI 260 - AT - Central Excise

Doctrine of merger - Refund claim deposited by the appellant during investigation is barred by limitation - HELD THAT - The order of the Commissioner (Appeals) remanding the matter back to the Original Authority for consideration of refund claim on the ground of limitation had been challenged before the Tribunal and the Tribunal in M/S KURELE FRAGRANCES PVT. LTD. VERSUS COMMISSIONER OF CGST CENTRAL EXCISE ALLAHABAD 2024 (7) TMI 303 - CESTAT ALLAHABAD where it was held that The issue is no longer res integra and it has been held by Division Bench of this Tribunal in M/S. PARLE AGRO PVT. LTD. VERSUS COMMISSIONER CENTRAL GOODS SERVICE TAX NOIDA (VICE-VERSA) 2021 (5) TMI 870 - CESTAT ALLAHABAD wherein this Tribunal have held that interest on refund of amount deposited during investigation or deposited during pendency of appeal is allowable under Section 35EE of the Act and has to be paid from the date of deposit till the date of refund. Since the appeal has been allowed the order of the Appellate Authority was set aside. The order of Commissioner (Appeal) merged in the order of the Tribunal. Accordingly there would be no order remanding the matter back to the Original Authority. All the proceedings so undertaken in terms of the above order of the Commissioner (Appeals) remanding the matter back to the Original Authority would be non-est in the eyes of law. There are no merits worth consideration in the impugned order - appeal disposed off.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this appeal are:

(a) Whether the refund claim of Rs. 50,00,000/- deposited by the appellant during investigation is barred by limitation;

(b) Whether the appellant is entitled to interest on the refundable amount from the date of deposit till the date of refund under the relevant statutory provisions;

(c) Whether the Commissioner (Appeals) was justified in remanding the matter back to the Original Authority to consider the refund claim on the ground of limitation, which was not raised in the appellant's appeal;

(d) The correctness and legality of the Original Authority's rejection of the refund claim on limitation grounds;

(e) The applicability of precedents and legal principles regarding interest on refund amounts deposited during pendency of investigation or appeal.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a) and (d): Limitation Bar on Refund Claim

The Original Authority rejected the refund claim of Rs. 50 lakhs on the ground of limitation, as reflected in Order-in-Original dated 29.04.2022. The Commissioner (Appeals) remanded the matter back to the Original Authority to reconsider the refund claim on the limitation ground, despite limitation not being a ground raised in the appellant's appeal.

The Tribunal examined this approach critically. It was noted that the refund was originally sanctioned by the Assistant Commissioner without interest on 02.01.2020, and the Revenue did not file any appeal against this order. Therefore, the Commissioner (Appeals) lacked jurisdiction to entertain or decide on grounds not raised in the appeal, such as limitation.

The Tribunal held that the order remanding the matter back to the Original Authority on limitation grounds was improper and non-est in law. All proceedings pursuant to such remand were void. This principle aligns with settled legal doctrine that an appellate authority must confine itself to grounds raised in the appeal and cannot introduce new grounds detrimental to the appellant.

Issue (b): Entitlement to Interest on Refund

The appellant claimed interest on the refundable amount from the date of deposit till the date of refund under Section 35EE of the Central Excise Act. The Commissioner (Appeals) rejected the claim, but this was challenged before the Tribunal.

The Tribunal relied heavily on the precedent set by the Division Bench in Parle Agro Pvt. Ltd. vs. Commissioner, CGST, Noida, where it was held that interest on refund of amounts deposited during investigation or appeal is allowable under Section 35EE and must be paid from the date of deposit till the date of refund. This ruling was further confirmed by the Punjab & Haryana High Court in Riba Textile Ltd. vs. CCE & ST, thereby reinforcing its binding nature.

The Tribunal also referenced the Supreme Court ruling in Sandvik Asia Ltd. vs. Commissioner of Income Tax-I, Pune, which supports the principle that interest is payable on refundable amounts deposited during pendency of proceedings.

Applying these precedents, the Tribunal held that the appellant was entitled to interest @12% per annum on the refundable amount of Rs. 50,00,000/- from the date of deposit (03.06.2006) till the date of refund (02.01.2020).

Issue (c): Jurisdiction and Scope of Commissioner (Appeals) in Remanding Matter

The Commissioner (Appeals) remanded the matter to the Original Authority to consider the refund claim on limitation grounds, which was not a ground raised by the appellant in the appeal. The Tribunal found this action to be beyond the jurisdiction of the Commissioner (Appeals), as an appellate authority is bound to decide only on the grounds raised by the appellant.

This procedural impropriety was a significant factor in setting aside the impugned order. The Tribunal emphasized the settled principle that an appellant must be at peril only for the grounds raised in the appeal, and not for any new grounds introduced by the appellate authority.

Additional Findings and Reasoning

The Tribunal noted that the refund had been sanctioned by the Assistant Commissioner without any appeal from the Revenue, which further solidified the appellant's entitlement to the refund and interest. The Tribunal also observed that the appeal filed by the appellant challenged both the remand order and the non-grant of interest, and these challenges were upheld in the Tribunal's final order.

3. SIGNIFICANT HOLDINGS

"I find that the issue herein is squarely covered on all four by the precedent ruling of Division Bench of this Tribunal in Parle Agro Ltd. (Supra) which has also been confirmed by Punjab & Haryana High Court in Riba Textile Ltd. (Supra) in CEA No.8/2022 order dated 14.03.2022."

"In view of my aforementioned observations, I allow this appeal and hold that the Appellant is entitled to interest on the refundable amount of Rs.50,00,000/- from the date of deposit (03.06.2006) till the date of refund being 02.01.2020, @ 12% per annum."

"As no appeal was filed Commissioner (Appeals) could not have decided on the grounds which were not even raised before him by way of appeal. This order should have been limited to the grounds raised in the appeal of the Appellant. It is settled principle in law that an appellant can be at peril as result of his appeal."

"All the proceedings so undertaken in terms of the above order of the Commissioner (Appeals) remanding the matter back to the Original Authority would be non-est in the eyes of law."

The Tribunal conclusively held that the appellant's refund claim was not barred by limitation, that the appellant was entitled to interest on the refundable amount from the date of deposit till the date of refund, and that the Commissioner (Appeals) erred in remanding the matter on grounds not raised in the appeal. Consequently, the appeal was allowed, and the impugned order was set aside.