Once refund is granted under section 11 B, it cannot be said to be "erroneous refund" in terms of section 11A of Central Excise Act and recourse available for recovery of such refund is only by way of following procedure laid down in section 35E of the Act and not section 11A.

Eveready Industries India Ltd. vs. CESTAT [2016] 68 taxmann.com 180 (Madras HC)

Once refund is granted under section 11 B, it cannot be said to be "erroneous refund" in terms of section 11A of Central Excise Act and recourse available for recovery of such refund is only by way of foll

owing procedure laid down in section 35E of the Act and not section 11A.

FACTS

The final assessment was completed and refund was determined. The assessee filed application for refund but was granted refund under section 11 B only for part-of the amount. However, thereafter, by invoking section 11A of the Central Excise Act, ·1944, the very same Assistant Commissioner, who sanctioned refund earlier,issued Show Cause Notice followed by order directing recovery of refund sanctioned. This order for recovery of refund was confirmed by Commissioner (Appeals) as well as the Tribunal. Before the High Court, it was contended that refund application is allowed under section 11 B and department has not followed procedure laid down by section 35E (2) of Central Excise Act, 1944 therefore it is not open for department to take recourse u/s. 11A. The department contended that where there is erroneous refund, the same can always be recovered by initiating proceedings u/s. 11 A without taking recourse to section 35E.

HELD

The High Court held that a careful look at the scheme of sections 11 A, 11 Band 35E would show that an application for refund is not to be dealt with merely as an administrative act. Section 11 B is a complete code in itself. Hence, power exercised u/s. 11 B is that of an adjudicating authority and order passed is certainly one ofadjudication. Therefore, it must be presumed that before according sanction for refund, an adjudicating authority had actually followed the procedure under section 11 B and passed an order of adjudication. Section 11A(1) prescribes the procedure forrecovery of any duty of excise, which is erroneously refunded. The power u/s. 35E is not actually to correct any error directly on the part of an adjudicating authority. This power is available only for directing competent authority to take matter to the Commissioner (Appeals). Hon'ble High Court made reference to its own judgment in case of Madura; Power Corpn. vs. Dy. CCE 2008 (229) ELT 521, where Court had occasion to consider interplay between section 11A and section 35E of Central Excise Act, 1944. It held that no one can have a quarrel with the proposition that sections 35E and 11A operate in different fields and are invoked for different purposes. However if the department's interpretation of section 11 A is accepted, it would lead to a situation of recognizing power of recovery in a subordinate authority when refund is already granted by a superior authority after adjudication, which is obviously not the legislative intent. It was held that harmonious reading of provisions of sections 11A and 35E indicates that section 11A does not contemplate overriding section 35E. Hence once refund application is allowed u/s. 11 B, such refund cannot be said to be erroneous refund in terms of section 11A (1). The recourse available for recovery of refund sanctioned in terms of section 11 B is therefore to follow procedure laid down in section 35E and not section 11A.ion 11A.