2026-VIL-893-GUJ-CE
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CENTRAL EXCISE High Court Cases

Central Excise - Refund of Duty paid Under Protest - Time-Barred Demand - Appellant-Company challenged the order of the Tribunal dismissing its appeal for refund of CENVAT credit which it had debited in its account on receipt of show-cause notice proposed to recover the credit under Rule 57C and 57AD of the Central Excise Rules, 1944. The appellant accepted the liability on merits before the Tribunal but the demand was held time-barred both by the Tribunal. Thereafter the appellant filed refund application which was allowed by the Deputy Commissioner but rejected in review by the Commissioner - Whether an assessee is entitled to refund of CENVAT credit debited by it under protest on receipt of show-cause notice when the demand for recovery is subsequently held to be time-barred and the assessee is found not to be liable for payment - HELD - The assessee is entitled to refund of the CENVAT credit which was debited under protest on receipt of the show-cause notice when the demand is subsequently held to be time-barred and the assessee is found not to be liable to pay the demand. It is immaterial whether the show-cause notice is set aside on the ground of limitation or on merits, the fact remains that the assessee was not liable to pay the demand and accordingly the amount deposited was rightly refunded - The decision in India Cements Limited is not applicable in the facts of the case because in that case there was an accepted liability on merits and what was barred was only the machinery of recovery under Section 11A of the Act. However, in the instant case, the liability itself is found not to be legally due and payable when the extended period of limitation could not be invoked. The distinction is material- where a liability is legally due on merits but time-barred under the limitation provisions, one category of cases arises; where a liability is found not to be legally due at all, an entirely different situation is presented - When the demand is held to be time-barred, implying the assessee has no liability, the amount deposited must be refunded. The assessee's obligation to pay ceases to exist when the demand is adjudged as time-barred and not legally due. Unjust enrichment does not arise when duty is paid subsequent to clearance of goods and no burden lies on the assessee to prove it was not passed on to the buyers - Both the Commissioner (Appeals) and CESTAT have committed an error in applying the decision of India Cements Ltd. which is not applicable in the facts of the case – The impugned orders are set aside and the appeals are allowed
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