Sanctioned Refund cannot be considered as erroneous

The CESTAT has ruled that a refund previously sanctioned by the department cannot be considered an 'erroneous refund'. This decision was made in a case where the revenue sought to recover excess refund from the appellant, M/s. RNB Carbides & Ferro Alloys Private Limited. The tribunal found that the appellant's inclusion of freight charges in the assessable value was in line with sale terms and prevailing departmental clarifications at the time.

In M/s. RNB Carbides & Ferro Alloys Private Limited v. Commissioner of Central Excise, Shillong [Excise Appeal No.187 of 2010 dated August 27, 2021], the current appeal has been filed against Order-in-Appeal No.29/SH/CE(A)/GHY/09 dated December 18, 2009 ("OIA"), wherein the revenue after scrutinizing the M/s. RNB Carbides & Ferro Alloys Private Limited ("the Appellants") accounts book held that the Appellants had overvalued its products by including freight charges and issued the Show Cause Notices ("SCN") to recover the excess refund which were availed by the Appellants.

Larger Period of Limitation was invoked by the Revenue on the ground that the Appellant should not have included outward freight in the Assessable Value and there was misdeclaration of "Place of Removal" which led to over valuation of Assessable Value thereby claiming excess refund.

The Appellant relying on the case of Commissioner of Customs and Central Excise, Aurangabad – v. Roofit Industries Limited [2015 (319) ELT 221 (SC)] and Circular No. 59/1/2003-CX dated March 03, 2003 and Circular No. 988/12/2014-CX dated October 20, 2014 contended that the Place of Removal had to be determined by referring to the Place of Sale, which in the case was the buyer’s premises.

The Hon’ble CESTAT, Kolkata observed that the Appellants’ case fell within the purview of exception to Rule 5 and referred to Rule 7 read with Rule 11 of Central Excise (Valuation) Rules, 2000 ("the Valuation Rules") which mentions that the Assessable Value would be the price charged along with the additional charges upto the place of sale including freight.

Noted that the transportation costs of the Appellant would be included by relying on Circulars (supra) put forth by the Appellants for the reason that the terms and conditions of the sale unambiguously stipulates that the act of sale would be completed upon on-door delivery which in the case of the Appellant was the buyer’s premises.

Further placed reliance on the case of Topcem India vs. UOI [2021 (376) ELT 573] and held that the refund already sanctioned cannot be termed as "erroneous refund" more so view of the fact that refund has been duly sanctioned by the Department as per the laws prevailing then duly supported by the Central Board of Excise and Customs ("CBEC") clarifications at relevant point of time.