M/S Barak Alloy vs. The Union Of INDIA And 3 Ors

Facts

The petitioner, M/s Barak Alloy, a partnership firm, filed a writ petition challenging a recovery notice dated 30.12.2020, issued by the Assistant Commissioner, Central Goods & Services Tax, Silchar. The notice demanded payment of Rs. 3,10,87,475/- along with interest, representing an erroneously refunded amount. This refund was initially sanctioned to the petitioner based on Supreme Court and High Court orders, under specific notifications, and was disbursed on execution of surety bonds. The petitioner contended that the refund was not erroneous and that they had subsequently filed an application for value addition/special rate before the Principal Commissioner, Central Goods & Services Tax, Guwahati, following a Supreme Court judgment that upheld relevant notifications. The revenue contended that no such application was filed before the competent authority.

Held

The Court held that the case of the petitioner is similar on facts and law to the case of M/s. Jyothi Labs Ltd. vs. Union of India, decided by this Court on 24.03.2021. In M/s. Jyothi Labs Ltd., the Court had observed that manufacturers have an option to apply for a special rate representing actual value addition if it exceeds the rates specified in Notifications No. 20/2008-Central Excise and No. 17/2008-Central Excise dated 27.03.2008. The Supreme Court had restored these notifications. While the petitioner in the present case filed the special rate application before the Regional Officer, though addressed to the Principal Commissioner, the Court directed the petitioner to file a fresh application before the Principal Commissioner, Central Goods & Services Tax, Guwahati, within fifteen days. The Principal Commissioner is to consider this application, determine the special rate, and then initiate further proceedings as per law. Crucially, no coercive action is to be taken against the petitioner until a decision is reached on the special rate application, which must be disposed of within two months of receiving a certified copy of the order. The Court found that the petitioner is entitled to similar relief as granted in M/s. Jyothi Labs Ltd.

Key Issues

1. Whether the recovery notice dated 30.12.2020, demanding payment of Rs. 3,10,87,475/- along with interest under Section 11A and Section 11AA of the Central Excise Act, 1944, is sustainable, given the petitioner's claim that the refund was not erroneous and that a subsequent application for value addition/special rate was filed. (Question of law and mixed fact and law, turning on Section 11A and 11AA of the Central Excise Act, 1944). Petitioner's arguments: The refund was not erroneous and therefore Section 11A of the Central Excise Act, 1944, is not attracted. The impugned notice is liable to be set aside. The Supreme Court's judgment dated 22.04.2020 upheld Notifications dated 27.03.2008 and 10.06.2008 providing for value addition. The petitioner filed an application for value addition/special rate, which ought to have been decided before recovery was insisted upon. If decided favorably, the petitioner would be entitled to a refund, not liable for recovery. The demand for recovery violates the Principle of Natural Justice. Reliance was placed on this Court's judgment in M/s. Jyothi Labs Ltd. vs. Union of India. Revenue's arguments: No application for special rate/value addition was filed before the respondent authorities as claimed by the petitioner. The petitioner's averments regarding filing the application were contradictory, and the copy annexed was not filed before the competent authority. Therefore, the case of M/s. Jyothi Labs Ltd. is not covered as the application in that case was filed before the appropriate authority within time.