M/S.Sanmar Matrix Matrix Metals LTD vs. The Commissioner Of GST And Central Excise

Facts

M/s. Sanmar Matrix Metals Ltd. (appellant) availed CENVAT credit under the Central Excise Act, 1944. A show cause notice dated 03.06.2011 proposed denial of CENVAT credit for service tax paid on input services during May 2010 to March 2011. This was confirmed by an Order-in-Original dated 30.03.2012. The appellant's appeal was dismissed by the first appellate authority. Subsequently, the appellant sought a refund of excise duty paid on goods cleared for export, which was sanctioned but appropriated against the demand from the Order-in-Original. The Tribunal, by order dated 10.12.2018, set aside the demand. The appellant then requested the return of the appropriated rebate, which was rejected on grounds of limitation and the nature of the appropriation. This rejection was upheld by the first appellate authority and the Tribunal, leading to the present appeal.

Held

The Court held that the appropriation of the rebate amount was illegal as it was made during the pendency of the appeal before the Tribunal and in contravention of a stay order granted by the Tribunal. The Court found that the very filing of an appeal against an assessment order amounts to payment under protest, citing judgments from the Bombay and Delhi High Courts. Therefore, the appropriation, even if considered a payment, was deemed to be under protest. Consequently, the second proviso to Section 11B of the Central Excise Act, 1944, would apply, exempting the claim from the one-year limitation period. The Court concluded that the amount appropriated could not be brought under Explanation (ec) of Section 11B, and the refund sought was not barred by limitation. The objection regarding the closure of prior writ petitions was rejected, as the present appeal was testing the effect of the appropriation order made during the pendency of an appeal with a stay, not the legality of the appropriation itself. Both substantial questions of law were answered in favour of the appellant. The appeal was allowed, and the respondent was directed to refund the entitled amount within six weeks.

Key Issues

1. Whether the Tribunal was correct in holding that the claim for the return of an amount illegally appropriated is in the nature of a refund, making Section 11B of the Central Excise Act, 1944, and its explanation applicable, thereby imposing a limitation period? The appellant argued that the appropriation was illegal as it occurred during the pendency of an appeal and in the teeth of a stay order granted by the Tribunal. Therefore, the amount should not be construed as a duty falling under Section 11B, and no limitation should apply. The appellant relied on various judgments and departmental circulars. The respondent argued that the right to claim refund arose only after the Tribunal's order of 10.12.2018, thus attracting the one-year limitation period under Section 11B. The respondent also contended that prior writ petitions challenging the appropriation order were closed, preventing a collateral attack. 2. Whether the Tribunal was correct in holding that the return of rebate appropriated during the pendency of an appeal is consequent to the Tribunal's order, thus attracting the limitation prescribed in Explanation (ec) to Section 11B, when the appropriation pertained to different proceedings? The appellant contended that the appropriation was invalid due to the stay order and the pendency of the appeal, and thus the limitation period should not apply. The respondent maintained that the refund claim arose post-Tribunal order and was subject to limitation.