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CX - Rebate - appropriation of sanctioned rebate against dues to department - appropriation when stay application is pending before Tribunal is not sustainable in Law: CESTAT

By TIOL News Service

MUMBAI, DEC 17, 2012: THE appellant, Mars International, Goregaon (East), Mumbai, filed two rebate claims, one dated 15/09/2011 for an amount of Rs.2,38,301/- and another 03/10/2011 for an amount of Rs.58,420/- respectively under Rule 18 of the Central Excise Rules, 2002 in respect of goods manufactured and exported by them. These claims were sanctioned by the jurisdictional Deputy Commissioner vide order dated 12/12/2011 and 29/12/2011. However, the said Deputy Commissioner while sanctioning the rebate, appropriated the same under Section 11 of the Central Excise Act, 1944 towards dues pending from the appellant vide order-in-appeal No. SB (08 to 10) M.V/2011 dated 08/02/2011 without putting the appellants to notice.

The appellant preferred appeals against the said appropriation order before the lower appellate authority and contended that appropriation under Section 11 is not permissible in law, in view of the decisions of the High Court of Bombay, Allahabad, Rajasthan, Madhya Pradesh, wherein it has been uniformly held by the High Courts that when the stay application is pending before the higher appellate authority against the orders of the lower appellate authority, coercive measures cannot be initiated against the appellants.

The Learned Commissioner (Appeals) did not heed to this pleading and dismissed their appeal and so they are before the Tribunal.

The Tribunal observed,

The High Court of Karnataka in the case of CCE, Bangalore Vs. Stella Rubber Works, 2011-TIOL-325-HC-KAR-CX held that Section 11 of the Central Excise Act, 1944 does not contemplate adjustment of monies due to the assessee towards the amount due to the revenue and further held that once the adjudicating authority holds that the assessee is entitled to refund, in the absence of a specific provisions authorizing the revenue adjusting the said amount towards dues to them, it is improper to make adjustment.

The High Court of Bombay in the case of Thermo Plastic Industries held that initiation of coercive measures to recover dues when appeal is pending before the higher authority is not sustainable in law. Similar view was taken by the High Courts of Allahabad, Rajasthan, Madhya Pradesh and Karnataka.

Therefore, the appropriation of the amounts when the appellant's stay application was pending before the Tribunal is not sustainable in law. Accordingly, the impugned order is set aside and the jurisdictional Deputy Commissioner is directed to refund the appropriated amount forthwith to the appellant along with interest thereon in accordance with the law.

(See 2012-TIOL-1868-CESTAT-MUM)


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