Dept. Not Empowered To Retain Amount Deposited Under-Protest: CESTAT

The Allahabad Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the amount deposited during the pendency of adjudication proceedings or investigation is in the nature of deposit made under-protest or pre-deposit and therefore principles of unjust enrichment would not be attracted.

The bench of P.K. Choudhary (Judicial Member) has observed that deposits made under-protest or pre-deposit cannot be retained by the department, as it has no authority to retain the amount and it must be refunded along with interest.

The appellant/assessee is engaged in the manufacturing of M.S. ingots, M.S. bars, etc. The appellant said that on April 18, 2012, the appellant was subjected to searches by the officers of DGCEI. During the investigation, searches were again conducted by the officers of the Central Excise Commissionerate, Allahabad. During the searches, the officers alleged non-payment or short-payment of duty, and the appellant was coerced to hand over two checks of Rs. 20 lakhs each, with an assurance that the remaining amount of Rs. 40 lakhs would be paid during the investigation.

On the insistence of the officers, the appellant deposited an amount of Rs. 30 lakh through e-challans. However, as no show-cause notice was issued in respect of the non-payment or short-payment of duty, the appellant submitted a letter seeking a refund of Rs. 30 lakh.

As per the appellant, it was only after the letter dated 08.02.2013 was submitted that a show cause notice dated 06.06.2013 was issued alleging non-payment or short payment of duty and appropriation of the amount deposited by the appellant.

The show cause notice was adjudicated by Order-in-Original, wherein part of the demand of duty was confirmed against the appellant, an amount of Rs. 30 lakhs was appropriated, and penalties were imposed on the appellant and some other persons. The order was challenged by the appellant and others and also by the department before the tribunal, and by Final Order dated July 31, 2018, the appeal filed by the appellant and others was allowed and the appeal filed by the department was dismissed.

The appellant then filed an application for a refund of Rs. 30 lakhs deposited during the investigation, which, upon verification, was allowed sanctioning the refund of Rs. 30 lakhs by holding that the amount was deposited under protest, and in terms of the second proviso to Section 11B (1) of the Central Excise Act, 1944, the limitation of one year shall not apply.

The Appellant submitted that since the payment of Rs.30 lakhs was made under protest, it does not bear the character of duty and therefore Section 11B (1), which is applicable only for the refund of duty of Excise and interest, has no applicability. Assuming without conceding that the amount of Rs.30 lakhs bears the character of duty, then also the bar of limitation of one year shall not be applicable, in terms of the second proviso to Section 11B (1). Since in terms of the order passed by the Tribunal, the Appellant was not liable to pay any single amount of duty, hence the amount of Rs.30 lakhs cannot be retained by the department as Article 265 of the Constitution prohibits levy or collection of tax except by authority of law.

The tribunal has held that when the appellant is not required to pay any amount, then the appellant is clearly entitled to a refund of the amount deposited under protest, and consequently, the revenue has no authority to retain such an amount as it would be in violation of Article 265 of the Constitution.

Counsel For Appellant: Nishant Mishra

Counsel For Respondent: Sandeep Pandey

Case Title: M/s Jalan Con Cast Ltd. Versus Commissioner of Central GST & Central Excise

Case No.: Excise Appeal No.70696 of 2021

Click Here To Read The Order