CESTAT Chandigarh Remands Dabur Appeals Over Excess Self-Credit, Excise Duty Demands For Recalculation

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chandigarh, has sent back a batch of appeals involving demands against Dabur India Ltd.'s Jammu and Kashmir units for allegedly taking refunds or self-credit in excess of the value addition permitted under the applicable exemption.

For Unit I, the Department had demanded ₹3.45 crore as repayment of self-credit and a further ₹12.41 lakh as excise duty. For Unit II, it had demanded ₹5.40 crore as repayment of self-credit and a further ₹2.43 crore as excise duty.

The tribunal directed the authorities to recalculate the demands after considering special rates of value addition subsequently fixed for Dabur's products.

A bench comprising Judicial Member S.S. Garg and Technical Member P. Anjani Kumar observed that the authorities had confirmed the demands without considering those special rates.

“Having passed the orders confirming the demands, not keeping in mind the special value addition fixed by the competent authority, the respective authorities are required to re-do the whole exercise,” the tribunal ruled.

Dabur's two units in Jammu had availed an area-based exemption under Notification No. 56/2002-CE dated December 14, 2002. Notifications No. 19/2008 and 34/2008 subsequently restricted the refund of excise duty to value addition. They also provided for fixation of special rates of value addition.

Dabur, along with others, challenged the validity of the notifications. The Supreme Court upheld their validity in VVF Ltd., reported at 2020 (372) ELT 495 (SC). Dabur then approached the Department for special rates of value addition for different products, which were subsequently fixed.

While these proceedings were underway, the Department issued show cause notices seeking repayment of refunds or self-credit that Dabur had allegedly taken over and above the value addition prescribed under the amended notifications. The demands were subsequently confirmed.

Dabur argued that the orders confirming the demands had ignored the special rates already fixed by the competent authority. It also pointed out that in five appeals, the Department had sought recovery twice. It had demanded repayment of the self-credit and also demanded excise duty that had been paid using that credit for subsequent clearances.

The Department's authorised representative agreed that the matters could be sent back for recalculation after giving effect to the special rates fixed by the competent authority.

The tribunal criticised the manner in which the proceedings had been handled. “We find that the impugned proceedings are result of the working of the Department in different silos where the left hand is not aware of what the right hand was doing,” it observed.

The tribunal noted that the Department was justified in protecting revenue by raising demands where Dabur appeared to have taken more self-credit than the amended notifications permitted. It also observed that the authorities should have checked whether Dabur had applied for special rates and whether those applications had already been decided.

On the issue of duplicate recovery, the tribunal held that demanding both the excess refund and the amount arising from utilisation of the credit would amount to double jeopardy.

“Demanding both the excess refund and utilization of credit amounts to causing double jeopardy to the assessees/ appellants,” it observed. “We are of the considered opinion that one of them can only be demanded back.”, The tribunal ruled.

The tribunal accordingly allowed the appeals by way of remand. It directed the appellate authority to recalculate the demands after considering the special rates fixed by the competent authority and the issue of duplicate recovery.

For Appellant: Advocates Krati Singh and Jashanpreet Kaur,

For Revenue: Maheswar Maji and Amita Gupta, Authorized Representatives