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M/s. Eveready Industries India Ltd. Versus The Customs, Excise and Service Tax Appellate Tribunal, The Assistant Commissioner of Central Excise, The Commissioner of Central Excise,

2016 (4) TMI 688 - MADRAS HIGH COURT

Recovery of duties not levied or not paid or short-levied or short-paid or erroneously refunded - Whether the first respondent is right in holding that there can be a demand notice under Section 11A of the Central Excise Act, 1944 by the Original Authority for alleged erroneous refund (earlier granted by the same Original Authority) without reviewing at all the refund order of the Original Authority by the Superior Authority in terms of Section 35E of the Act ibid (vide para No. 6 of the impugne .....

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the assessment. - As decided in Asian Paints (India) Limited [2002 (4) TMI 62 - SUPREME COURT OF INDIA ] there is no nexus between Section 11A and Section 35E. Section 11A does not indicate that the legislature intended to override Section 35E. Both sections have to be read harmoniously. In the present case, Annexure-I certificate has been issued in favour of the petitioners from time to time on executing B-8 security bond and on furnishing a bank guarantee. The Department has to follow the .....

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nding Counsel, the Courts were confronted with an order of adjudication passed under Section 11B on an application. Once an application for refund is allowed under Section 11B, the expression 'erroneous refund' appearing in Sub-Section (1) of Section 11A cannot be applied. If an order of refund is passed after adjudication, the amount refunded will not fall under the category of erroneous refund so as to enable the order of refund to be revoked under Section 11A(1). One Authority cannot be allow .....

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an, J ) This appeal is filed by the assessee under Section 35G of the Central Excise Act, 1944 against the order of the Customs, Excise and Service Tax Appellate Tribunal, reversing the decision of the Commissioner (Appeals) and restoring the order of the Original Authority. 2. Heard Mr.Raghavan Ramabadran, learned counsel for the appellant/ assessee and Mr.Rajnish Pathiyil, learned Standing Counsel for respondents 2 and 3. 3. On 19.3.2008, the above appeal was admitted on the following substant .....

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the order of the Appellate Authority is also the order of finalisation of provisional assessment ? i.e. where the appellate order is a continuation of finalisation of the provisional assessment (vide para No.7 of the impugned order) ?" 4. However, when the appeal came up for hearing on 23.4.2015, this Court framed an additional substantial question of law to the following effect: "Whether the first respondent is right in holding that there can be a demand notice under Section 11A of t .....

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6. Therefore, the only question that survives for our consideration today is the question that was additionally framed on 23.4.2015. 7. Brief facts that led to the filing of the above appeal can be summarily stated as follows : (i) The appellant is the manufacturer of dry cell batteries and they were clearing the goods on payment of duty on a provisional basis as per Rule 9B of the Central Excise Rules, 1944 by executing a bond with security in the form of bank guarantee. (ii) In order to finali .....

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0/-. (iii) As against the said order, the assessee filed an appeal before the Commissioner (Appeals). In the appeal, the assessee relied upon a circular of the Ministry of Finance bearing F.No.312/1/75-Cx.10 dated 8.8.1975 wherein the question of cash discount was explained. (iv) The circular stated that discounts for prompt payment of price of goods on delivery were admissible in arriving at the assessable value, if they were available to all buyers. Accepting the same and after recording a fin .....

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holson (India) Ltd. Vs. Union of India [1984 (17) ELT 4] and Goodlass Nerolac Paints Limited Vs. Union of India [1993 (65) ELT 186]. Without reference to the order of the Commissioner (Appeals), the Assistant Commissioner finalised the provisional assessment by an order dated Nil/4/1998, including a sum of ₹ 9,30,499/- towards cost of distribution and interest on inventory and arrived at the refund to be made to the extent of ₹ 12,61,864/-. (vi) Thereafter, the appellant filed an app .....

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3.1999 was issued by the very same Assistant Commissioner, who accorded sanction for refund in terms of Section 11A, holding that there was an erroneous refund of ₹ 3,31,365/-. This was followed by an Order in Original dated 21.6.1999 directing the recovery of the refund already made. This Order in Original having been confirmed by the Commissioner (Appeals) by an order dated 29.2.2000 and by the Tribunal by an order dated 19.9.2007, the assessee is before us. 8. In the background of the a .....

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d that wherever there is erroneous refund, the same can always be recovered by initiating proceedings under Section 11A without taking recourse to the provisions of Section 35E. 10. It is on account of these rival contentions, this Court thought it fit to frame the additional question of law on 23.4.2015, which alone now survives for adjudication. 11. In order to understand the scope of the rival contentions, it is necessary to have a look at Sections 11A and 35E. 12. Section 11A reads as follow .....

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t or the rules made thereunder, a Central Excise Officer may, within one year from the relevant date, serve notice on the person chargeable with the duty which has not been levied or paid or which has been short-levied or short-paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice : Provided that where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded b .....

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unded is one crore rupees or less a notice under this Sub-Section shall be served by the Commissioner of Central Excise or with his prior approval by any officer subordinate to him. Provided also that where the amount of duty which has not been levied or paid or has been short levied or short paid or erroneously refunded is more than one crore rupees, no notice under this Sub-Section shall be served without the prior approval of the Chief Commissioner of Central Excise. Explanation- Where the se .....

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termined. (3) For the purposes of this Section, - (i) refund includes rebate of duty of excise on excisable goods exported out of India or on excisable materials used in the manufacture of goods which are exported out of India; (ii) relevant date means, - (a) in the case of excisable goods on which duty of excise has not been levied or paid or has been short-levied or short-paid - (A) where under the rules made under this Act a periodical return, showing particulars of the duty paid on the excis .....

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ssessed under this Act or the rules made thereunder, the date of adjustment of duty after the final assessment thereof; (c) in the case of excisable goods on which duty of excise has been erroneously refunded, the date of such refund." 13. Section 11A(1) prescribes the procedure for recovery of any duty of excise, which is either not levied or not paid or which has been short-levied or short-paid or which has been erroneously refunded. The recovery of such amounts can be made under Section .....

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effect from 12.5.2010, the period of limitation has been enhanced from six months to one year under Finance Act, 2000. 14. Section 35E, which confers power upon the Board as well as the Commissioner of Excise to pass certain orders, reads as follows : "Powers of Board or Commissioners of Central Excise to pass certain orders. (1) The Board may, of its own motion, call for and examine the record of any proceeding in which a Commissioner of Central Excise as an adjudicating authority has pas .....

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to him has passed any decision or order under this Act for the purpose of satisfying himself as to the legality or propriety of any such decision or order and may, by order, direct such authority to apply to the Commissioner (Appeals) for the determination of such points arising out of the decision or order as may be specified by the Commissioner of Central Excise in his order. (3) No order shall be made under Sub-Section (1) or Sub-Section (2) after the expiry of one year from the date of the d .....

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se may be, as if such application were an appeal made against the decision or order of the adjudicating authority and the provisions of this Act regarding appeals, including the provisions of Sub-Section (4) of Section 35B shall, so far as may be, apply to such application. (5) The provisions of this Section shall not apply to any decision or order in which the determination of any question having a relation to the rate of duty of excise or to the value of goods for the purposes of assessment of .....

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in relation to any goods on or after the 28th day of February 1986; or (b) relating to the value of goods for the purposes of assessment of any duty of excise in cases where the assessment is made on or after the 28th day of February 1986; or (c) Whether any goods or excisable goods or whether the rate of duty of excise on any goods is nil; or (d) whether any goods fall under a particular heading or sub-heading of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), or the Additional .....

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the amounts in respect of such matters as are specifically provided in this Act." 15. As could be seen from Sub-Section (2) of Section 35E, the Commissioner of Central Excise has a suo motu power of revision, to call for and examine the record of any proceedings, in which, an Adjudicating Authority, subordinate to him, has passed any decision or order under this Act for the purpose of satisfying himself as to the legality or propriety of any such decision or order. 16. Interestingly, the po .....

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he extent of directing the Authority to file an appeal to the Commissioner (Appeals) for the determination of the issues. But, even the limited power under Sub-Section (2) of Section 35E can be exercised only within the period of limitation prescribed under Sub-Section (3). Sub-Section (3) prescribes a period of limitation of one year. This period of one year is available from the year 1984, as it was introduced under Finance Act, 1984. 18. Sub-Section (5) of Section 35E carves out an exception .....

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f a rate of duty in relation to any goods or valuation of any goods. Clause (e) under the Explanation states that the question as to whether the value of any goods for the purposes of assessment of duty of excise shall be enhanced or reduced by the addition or reduction of the amounts in respect of such matters as are specifically provided in the Act, will be deemed to be an issue relating to the determination of a rate of duty. 20. We have dealt with Sub-Section (5) and the Explanation thereund .....

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ns : (i) Union of India Vs. Jain Shudh Vanaspathi Ltd. [(1996) 86 ELT 460 (SC)] (ii) Asian Paints (India) Limited Vs. Collector of Central Excise [(1994) 54 ECR 173 (FB of the Tribunal] (iii) Asian Paints (India) Limited Vs. Collector of Central Excise [(2002) 142 ELT 522 (SC)] (iv) Sivananda Pipe Fittings Ltd. Vs. Superintendent of Central Excise [(1998) 97 ELT 52 (Madras)] (v) Commissioner of Central Excise Vs. Gillooram Gaurishankar [MANU/JH/0088/2002] (vi) Commissioner of Central Excise Vs. .....

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e facts that we have left far behind. As we have stated earlier, the Order in Original, passed n 22.12.1997, covered various issues, one of which related to abatement towards cash discounts. The Original Authority followed the decision of the Supreme Court in Addison & Co. Ltd. [(1997) 91 ELT 532], wherein it was held that turnover discount was an admissible abatement and should be known at the time of removal. This Order in Original was set aside by the Commissioner (Appeals) by the order d .....

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, against one of which, had also been dismissed by the Supreme Court, the Commissioner (Appeals) held that the Original Authority was wrong in stating that the cash discounts were restricted to the cases wherever passed on. The said order of the Commissioner (Appeals) attained finality. Though, without reference to the order of the Commissioner (Appeals), the Original Authority finalised the assessment by his order dated Nil/4/1998 and made a demand for duty, the Original Authority subsequently .....

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ady been made on 29.9.1998. But, the Department did not choose to contend that the appeal still survives and there was a re-thinking on their part to invoke the power under Section 11A. 27. In other words, by their failure to bring it to the notice of the Commissioner (Appeals) at the time when Appeal No.206/98 came up for hearing and decided on 30.11.1998, the Department lulled the assessee into a sense of false security about the refund already made on 29.9.1998. This is an aspect, which we sh .....

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ause notice was in accordance with the provisions of law and unassailable. 28. But, a careful look at the scheme of Sections 11A, 11B and 35E would show that an application for refund is not to be dealt with merely as a ministerial act or an administrative act. Under Section 11B of the Act, a person, claiming refund of any duty of excise and interest already paid, should make an application in the prescribed form. Such application is to be made within the period of limitation prescribed under Su .....

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e prescribed in Clauses (a) to (f) under the Proviso to Sub-Section (2) of Section 11B. 29. Sub-Section (3) of Section 11B, which contains a non-obstante clause, makes it clear that de hors any judgment, decree, order or direction of the Appellate Tribunal or any court or any other provisions of the Act, no refund shall be made except as provided by Sub-Section (2). 30. Therefore, the detailed procedure prescribed under Section 11B not only regulates the manner and form, in which, an application .....

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petent to pass any order or decision under this Act, but does not include the Central Board, Commissioner of Excise (Appeals) or the Appellate Tribunal. Hence, the power exercised under Section 11B is that of an Adjudicating Authority and the order passed is certainly one of adjudication. 32. It is only when an order of adjudication is passed under Section 11B that a person, who makes a claim for refund, will get his money back. This assumes significance in the light of the fact that by the proc .....

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ith law. Therefore, we would give the benefit of doubt to the Assistant Commissioner and presume that before according sanction in September 1998 for refund, he had actually followed the procedure under Section 11B and passed an order of adjudication. 34. Once it is seen that an order of adjudication has been validly passed under Section 11B and a refund has also been made on 29.9.1998, then the next question that would fall for consideration is as to whether Section 11A can be invoked thereafte .....

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als), Additional Commissioner of Central Excise, Joint Commissioner of Central Excise, Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise or any other officer of the Central Excise Department, or any person (including an officer of the State Government) invested by the Central Board of Excise and Customs constituted under the Central Boards of Revenue Act, 1963 (54 of 1963) with any of the powers of a Central Excise Officer under this Act. 36. Therefore, an order o .....

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ion 11B(2) and an Assistant Commissioner can invoke the proceedings for recovery under Section 11A(1). 37. In other words, by reading the provisions of Section 11A in such a manner as the learned Standing Counsel would request us to do, we would be recognizing a power in a Subordinate Authority to invoke the power of recovery under Section 11A, despite the fact that a refund application has been adjudicated upon by a Superior Authority under Section 11B. We should keep this fact in mind before d .....

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peals). 39. Therefore, it was always open to the Principal Commissioner or the Commissioner of Central Excise to examine the order of the Adjudicating Authority namely the Assistant Commissioner in the proceedings under Section 11B and to give a direction to the Competent Authority to file an appeal against the order of refund under Section 11B, to the Commissioner of Appeals under Section 35. This was not done in this case. On the contrary, the Authorities allowed the order to be passed in Appe .....

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a clear finding that the assessee got the goods cleared for home consumption under Section 47 of the Customs Act by playing a fraud upon the Department. Therefore, when an objection was taken that after clearance under Section 47, the provisions of Section 124 cannot be invoked, the Supreme Court pointed out that fraud vitiates all solemn acts. That is not the type of case that we are dealing here. 41. In so far as the decision of the Full Bench of the Tribunal in Asian Paints (India) Limited is .....

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ferent provisions. Therefore, the said decision, which was also confirmed by the Supreme Court in Asian Paints (India) Limited [(2002) 142 ELT 522], cannot be of any application. 42. No one can have a quarrel with the proposition that Sections 35E and 11A operate in different fields and are invoked for different purposes. We are merely concerned in this case with the interplay between Sections 11A and 35E. We are also concerned with what happened in the form of an adjudication under Section 11B. .....

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ing allowed an adjudication under Section 11B to attain finality, there was any remedy open to the Department at all under Section 11A. Therefore, the decision in Sivanandha Pipe Fittings Ltd., is also of no assistance to the Department. 44. In so far as the decision of the Jharkhand High Court in Gillooram Gaurishankar is concerned, the question that was referred to the High Court was whether the statutory remedies under Section 11A(1) will have to be exercised, to the exclusion of the remedies .....

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er Section 11A. That is not the situation in this case. 46. In this case, an order of refund was passed on an application under Section 11B. The appeal against the finalisation of the assessment was closed on the basis of the refund order. There can be no doubt about the fact that the statutory right of appeal is a valuable right conferred upon the assessee. That right was actually altered on the basis of an order of refund. Suppose there had been no order of refund, the appeal could have been p .....

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desh High Court has made it clear, after analysing Sections 11A and 11B that there is an adjudication process involved in the processing of applications made under Sections 11A and 11B. The Andhra Pradesh High Court held that orders passed under Sections 11A and 11B are appealable. Therefore, the decision of the Andhra Pradesh High Court, especially the observations in paragraph 16, should be made use of by the assessee to contend that since there was no appeal against the order under Section 11 .....

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ting Authority under the Rules of the year 2001 and it was contended that such an order could be rectified only through an appeal mechanism prescribed under Section 35E(2). As seen from paragraph 11 of the decision, the contention of the assessee was that Section 11A does not contain a non obstante clause and that therefore, it cannot be invoked to nullify the appeal remedy available to the Department under Section 35E(2). 50. The very same argument now advanced by the Department to the effect t .....

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