Demand notices for erroneous refunds - Whether governed by monetary limits
WE received this mail from a confused departmental officer –
Grant or rejection of refund of Central excise duty is covered u/s 11B of the CEA, 1944 and the proper officer who undertakes this onerous task is the Assistant/Deputy Commissioner of Central Excise. The quantum of refund involved is not an issue and there are no monetary limits laid down for sanction of the same.
In case a refund claim sanctioned by the Assistant/Deputy Commissioner is not found to be proper or legal by the Commissioner, Central Excise, he can take recourse to review proceedings u/s 35E of the CEA, 1944 and direct filing an appeal before the Commissioner (Appeals) to decide the points raised in the review order.
The Board has vide Circular dated 22.09.1998 emphasized that mere review proceedings u/s 35E(2) of the CEA, 1944 do not result in recovery of erroneously granted refund but a demand notice u/s 11A of the CEA, 1944 is compulsory.
The issue that needs clarity is as to whether this demand notice to be issued u/s 11A of the CEA, 1944 is governed by the monetary limits contained in the Board Circular no. 752/68/2003-CX dated 01.10.2003 issued with the caption “Power of Adjudication of Central Excise Officers under Section 33 and Section 11A of the Central Excise Act, 1944 - Instruction -Regarding.”
Assume that a refund of Rs.51 lakhs has been sanctioned by the AC/DC. However, the Commissioner in review proceedings has directed filing of an appeal before the Commissioner (Appeals). So, an appeal has been filed and the same is pending for disposal.
Since as per Board's instructions a demand is required to be issued u/s 11A for recovery of the erroneous refund of Rs.51 lakhs, the demand notice is prepared and in view of the monetary limits envisaged in the Circular dated 1.10.2003, the same is signed and made answerable to the Commissioner of Central Excise.
The question is whether this demand notice is proper in law.
My perception is that it is wrong and the reasons are –
++ When the fact remains that refund claims are governed by section 11B of the CEA, 1944, grant or denial of the same vests in the hands of the A.C/D.C of Central Excise and cannot be usurped in any manner by the jurisdictional Jt. Commissioner/Additional Commissioner or for that matter by the Commissioner himself by initiating proceedings u/s 11A of the CEA, 1944 for recovery of erroneous refunds.
++ The monetary limits prescribed by the Board are in terms of the powers conferred in the proviso to section 33 of the CEA, 1944. It needs mention that section 33 of the CEA, 1944 speaks of the powers of adjudication given to the officers for confiscation of any goods and for imposition of penalty. Obviously, the power to decide a show cause notice demanding Central Excise duty is contained in section 11A of the CEA, 1944 and in those cases where there is no such proposal of confiscation of any goods or imposition of any penalty, there is no role to be played by section 33A of the CEA, 1944 and it can be kept out along with the instructions on monetary limits as laid down by the Board.
To sum up, demands for recovery of erroneously granted refunds are not to be governed by the monetary limits prescribed by the Central Board of Excise & Customs in its Circular 01.10.2003 and the amendments carried thereto.
But the above arguments may fail in case of notice issued in respect of recovery proceedings initiated for getting back duty erroneously refunded by reasons of fraud, suppression, collusion etc. This is for the reason that such demand notices would also invoke penal provisions under section 11AC of the CEA, 1944 and the monetary limits of adjudication would creep in via section 33 of the CEA, 1944.
I am confused. Will DDT guide me?
DDT on its part requests the Board to issue a Circular and clarify the doubts raised for the benefit of the ‘concerned' departmental officers.