CESTAT Ahmedabad Holds ₹54 Lakh Recovery Against Panasonic Time-Barred, Faults Department's Inaction

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Ahmedabad on 24 August set aside recovery of Rs. 54,00,034 from Panasonic Life Solutions India, holding that the Department's show cause notice issued nearly six years after the credit was taken was barred by limitation.

A Bench comprising Judicial Member Dr. Ajaya Krishna Vishvesha and Technical Member Satendra Vikram Singh held that recovery of irregular or excess credit under Notification No. 39/2001-CE is subject to the limitation prescribed under Section 11A of the Central Excise Act, 1944. It held:

“We therefore, hold that the entire proceedings emanating from a time barred show cause notice, are not sustainable. Therefore, impugned order can be set aside on limitation itself without going into merits of the case.”

Under Notification No. 39/2001-CE, a manufacturer is required to submit the relevant statement to the jurisdictional Assistant or Deputy Commissioner, who is required to verify the claim and determine the amount correctly refundable. For annual differential refund under paragraph 2.2, the refund is required to be made not later than 15 May of the subsequent financial year.

Panasonic had submitted its annual differential-duty refund statement on 11 May 2009, but the jurisdictional officer did not decide the application within the prescribed period. When no decision was communicated for almost one year, Panasonic took suo-moto credit of the duty in April 2010.

The Department issued the show cause notice on 29 February 2016, alleging that Panasonic had irregularly taken the credit in April 2010.

The Tribunal held that Paragraph 2C(g) of Notification, read with Section 11A of the Central Excise Act, 1944, makes recovery of irregular or excess credit subject to the statutory limitation period. Since Panasonic had taken the credit in April 2010, the Department had crossed even the extended five-year limitation period when it issued the notice.

On merits, it found that the Department had failed to establish the status of the refund application. A report dated 25 February 2026 from the CGST Bhuj Division stated that the records relating to the 11 May 2009 refund application, filed in the name of Anchor Electricals Pvt. Ltd., the former name of Panasonic Life Solutions India, could not be located. Consequently, the Department could not categorically determine whether the Rs. 54 lakh claim was still pending or had already been disposed of.

The Bench criticised the Department's inaction, observing that instead of deciding the refund application within the prescribed period, the jurisdictional officer remained silent for several years and the Department subsequently issued a recovery notice after the matter was detected during audit. It directed the jurisdictional Chief Commissioner to enquire into the reasons for the officers' inaction and take corrective measures. It further held:

“When no decision was communicated for almost one year, the appellant took suo-moto credit of duty in April 2010. Therefore, appellant has acted as per provisions of the notification and hence, cannot be faulted with.”

The Tribunal also distinguished the Revenue's reliance on decisions concerning impermissible suo motu refunds or adjustments, noting that the present case arose under Notification No. 39/2001-CE, which specifically provides a mechanism under which the manufacturer submits its statement to the jurisdictional officer for determination of the refundable amount.

Relying on the earlier decision in Parle Products, which was affirmed by the Gujarat High Court, the Bench noted that where an alleged breach resulted from a procedural lapse by the Central Excise officer himself, the Revenue could not sustain recovery against the manufacturer.

It held that the demand failed both on limitation and on merits, as the Department had itself failed to undertake the verification contemplated under paragraph 2.2(2) of Notification No. 39/2001-CE within the prescribed time.

Accordingly, the CESTAT set aside the impugned order and allowed Panasonic Life Solutions India's appeal.

Counsel for the Appellant: Kevin Gogri, Advocate

Counsel for the Revenue: R.R. Kurup, Superintendent (AR)