C.M.A(MD)No.368 of 2022

BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT

RESERVED ON : 02.04.2026

PRONOUNCED ON : 08.04.2026

CORAM:

THE HON'BLE MR JUSTICE N.ANAND VENKATESH

AND

THE HON'BLE MR JUSTICE K.K.RAMAKRISHNAN

C.M.A(MD)No.368 of 2022

M/s.Sanmar Matrix Metals Ltd.

Vadugapatti Village,

Viralimalai,

Pudukottai – 621 316. ... Appellant

Vs.

The Commissioner of GST and Central Excise,

Tiruchirappalli Commissionerate,

No.1, Williams Road,

Cantonment,

Tiruchirappalli - 620 001. ... Respondent

PRAYER:- Civil Miscellaneous Petition filed under section 35G of

the Central Excise Act to The Appellant prefers this present statutory

appeal against the Final Order No.42294/2021 dated 08.09.2021

passed by the Customs, Excise and Service Tax Appellate Tribunal,

Chennai.

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For Appellant: Ms.Radhika Chandra

for M/s.K.Vaitheeswaran

For Respondent: Mr.N.Dilip Kumar

Senior Standing Counsel

J U D G M E N T

(Judgment of the Court was delivered by

N.ANAND VENKATESH , J.)

The appellant was an assessee under the provisions of the

"Central Excise Act, 1944" (for brevity hereinafter referred to as "the

Act") and migrated into GST regime after the same came into force. The

appellant availed CENVAT credit, in respect of excise duty paid on

inputs and capital goods and service tax paid on input services under the

provisions of CENVAT Credit Rules, 2004.

2. A show cause notice dated 03.06.2011 was issued proposing

to deny CENVAT credit of service tax paid on input service during the

period May 2010 to March 2011. The proposal was confirmed by the

adjudicating authority by Order-in-Original No.4/2012 dated 30.03.2012.

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3. The appellant filed an appeal before the first appellate

authority challenging the denial of this CENVAT credit. The first

appellate authority dismissed the appeal filed by the appellant. Aggrieved

by the same, the appellant challenged the same before the Tribunal.

4. The appellant, in the meantime, had filed an application

under Rule 18 of the Central Excise Rules, 2002 seeking for refund of

excise duty paid on goods cleared for export. The application was

processed and refund was sanctioned by order dated 06.05.2014.

However, the rebate sanctioned was appropriated against the demand

arising out of the Order-in-Original No.4/2012, dated 30.03.2012.

5. It is alleged that the rebate was appropriated without

considering the pendency of the appeal in respect of the demand, before

the appellate Tribunal. Ultimately, the appellate tribunal by order dated

10.12.2018 was pleased to set aside the demand arising out of the Order-

in-Original No.4/12.

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6. In the light of the above development, the appellant filed a

request dated 14.08.2020 seeking for return of the rebate appropriated

against the demand confirmed in Order-in-Original No. 4/2012 in the

light of the order passed by the Tribunal. The request for return of rebate

was rejected by an order dated 08.09.2020 on the ground that the amount

of rebate appropriated cannot be returned based on a letter as it does not

have the character of pre-deposit and also the request dated 14.08.2020 is

barred by limitation, as the Tribunal order is dated 10.12.2018 and such

claim for refund ought to have been made within a period of one year.

7. The appellant filed an appeal before the first appellate

authority and the first appellate authority dismissed the appeal by order

dated 15.03.2021 once again on the ground of limitation. This order was

upheld by the Appellate Tribunal through the impugned proceedings

dated 08.09.2021 and aggrieved by the same, the present appeal has been

filed before this Court under Section 35G of the Act read with Section 83

of the Finance Act, 1994.

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8. This appeal was admitted on 08.04.2022 and the following

substantial questions of law were framed:

"1. Whether in the facts and circumstances of the

case, the Tribunal was right in holding that the claim for

return of amount illegally appropriated, is also in the nature of

refund consequent to the Order of the Tribunal and the

limitation in terms of explanation (B) (ec) to Section 11B is

applicable ?

2. Whether in the facts and circumstances of the

case, the Tribunal was right in holding that the return of rebate

appropriated during the pendency of Appeal is consequent to

the order of the Tribunal and hence, the limitation as

prescribed in explanation (ec) to Section 11B is applicable

when the appropriation of refund pertains to a completely

different proceedings?"

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9. When this appeal was taken up for final hearing on

26.03.2026, this Court, after hearing both sides, passed the following

order:

"We heard the learned counsel for the appellant and

the learned Senior Standing Counsel, appearing on behalf of the

respondent.

2. The warp and woof of the submission made on the

side of the appellant is that the Tribunal by an order dated

06.05.2013, granted stay of the demand that was raised by the

Department along with interest and penalty, subject to the

condition that the appellant makes a pre-deposit of a sum of Rs.

10,000/- within four weeks and it was also made clear in the

order that on such pre-deposit being made, the dues arising from

the impugned order will await and the recovery itself will be

stayed during the pendency of the appeal. When the stay order

was in operation, the appropriation was made by passing an

Order-in-Original No.30 of 2014 dated 06.05.2014. On going

through the appropriation order, it is seen that the subject matter

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before the Tribunal, namely, Order-in-Original No. 4 of 2012

dated 03.03.2012 was also included and the duty along with

penalty was appropriated by making a specific mention about

the stay order that was granted by the Tribunal on 06.05.2013.

Ultimately, the main appeal came to be allowed by the Tribunal

by order dated 10.12.2018.

3. The petitioner sent a communication dated

14.08.2020 requesting for refund by quoting the earlier request

made through communication dated 27.07.2020.

4. The above request made by the petitioner

ultimately came to be rejected by Order-in-Original No. 23 of

2020 dated 18.09.2020 and it was confirmed by the appellate

authority and it was further confirmed by the CESTAT through

the impugned proceedings dated 03.09.2021, which is the

subject matter of challenge in the present appeal.

5. The learned counsel for the appellant submitted

that the appropriation of the amount that pertain to the Order- in-

Original dated 30.03.2012 in the teeth of the stay order granted

by the Tribunal is invalid and the very filing of the appeal and

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which was pending on the date when the appropriation order

was passed, must be taken to be a protest expressed on the side

of the appellant. Therefore, the amount refundable to the

appellant cannot be construed as a duty to bring it within the

purview of 'Explanation (EC) to Section 11B of the Central

Excise Act, 1944'. The learned counsel for the appellant by

bringing to out attention various judgments and circulars issued

by the Department submitted that such a refund is not subject to

the limitation as provided in terms of the Explanation (EC) to

Section 11B of the Central Excise Act, 1944.

6. Per contra, the learned Senior Standing Counsel

appearing on behalf of the respondent submitted that the

appropriation order was put to challenge by filing WP(MD) Nos.

11682 and 11683 of 2014 and 3287 of 2015 and all these writ

petitions were closed by an order dated 22.07.2019. Hence, the

appropriation order that was passed was never interfered by this

Court.

7. In view of the same, the appellant cannot be

permitted to collaterally attack the appropriation order in

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this appeal. The learned counsel further submitted that the right

claimed by the appellant seeking for refund had arisen only

pursuant to the order passed by the Tribunal on 10.12.2018 and

therefore, the refund ought to have been sought for within a

period of one year. If the same is not done, the appellant loses

the right to claim for any refund. To substantiate this submission,

the learned Senior Standing Counsel relied upon various orders

passed by this Court.

8. This Court had put a pointed question to the

learned counsel for the appellant as to whether this Court can go

into the legality or otherwise of the appropriation order

pertaining to the appropriation made to the amount covered

under Order-in-Original dated 30.03.2012, when the writ

petition challenging the same has been closed and the

appropriation order as such has not been interfered. We raised

this question only on the ground that while passing an order in

this appeal, we have to necessarily deal with the issue as to

whether the appropriation made by the Department, in spite of

the stay order passed by the Tribunal, is valid. If a writ petition

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had not been filed challenging the appropriation order, at least

we could have gone into the legality and determined as to

whether the amount sought as a refund can be construed as a

duty and consequently will come within the purview of duty

under Section 11B of the Central Excise Act.

9. The learned counsel for the appellant seeks for

some time to clarify on this issue.

10. List the matter on 02.04.2026."

10. Pursuant to the above order, the matter was listed for final

hearing today. The learned counsel for the appellant submitted that there

is no estoppel in a taxing statute and the principle of equitable estoppel

which is the rule of equity cannot prevail against the law. To substantiate

this submission, the learned counsel relied upon the judgment in Metal

Forgings Pvt. Ltd. v. Union of India and Ors., reported in 1985 (20)

ELT 280 (Delhi), Commissioner of Wealth Tax v. Meattles (P.) Ltd.,

reported in [1985] 156 ITR 569. The learned counsel also relied upon the

judgment of the Apex Court in Metlex (1) Pvt. Ltd. v. Commissioner of

C. Ex., New Delhi, reported in 2004 (165) ELT 129.

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11. This Court considered the submissions made on either side

and the materials available on record.

12. This Court will now proceeded to answer the substantial

questions of law that were framed when the present appeal was

entertained on 08.04.2022.

13. In the case in hand, the CENVAT credit that was availed by

the appellant was sought to be denied and the Order-in-Original No.

4/2012 dated 30.03.2012 came to be passed as a consequence, the

demand that was made to the tune of Rs. 18,66,451/- was confirmed and

the appellant was also directed to pay the appropriate interest on the

above demand under the relevant provisions of the Act and the Rules.

Penalty was also imposed against the appellant. This Order-in-Original

that was passed by the Joint Commissioner, was confirmed in appeal by

order dated 25.09.2012.

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14. The above order was put to challenge before the CESTAT,

South Zonal Bench, Chennai. An interim order was passed by CESTAT

on 06.05.2013 by directing the appellant to make a pre-deposit of Rs.

10,000/- within a period of four weeks and upon such deposit, it was

made clear that the dues arising out of the impugned order and the

recovery will stand stayed during the pendency of the appeal.

15. Admittedly, when the interim order was in force, the Order-

in-Original No.13/2014 dated 06.05.2014, came to be passed by the

competent authority whereby the rebate that was involved to the tune of

Rs.7,92,177/- in thirteen numbers came to be rejected and the arrears of

revenue which also covered the demand made in Order-in-Original No.

4/12 dated 30.03.2012 was adjusted. Accordingly, the rebate amount that

was payable based on the claim made by the appellant came to be

adjusted by appropriating the total arrears of revenue to the tune of Rs.

74,32,547/- including the interest due on delayed payment of duty.

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16. The appellate tribunal, ultimately, passed the final order on

10.12.2018 by setting aside the demand arising out of the Order-in-

Original No. 4/2012 pertaining to CENVAT credit. It is under these

circumstances, the appellant sought for refund of the rebate appropriated

against the demand confirmed in Order-in-Original No.4/2012 in the

light of the order passed by the tribunal.

17. Section 11B of the Act deals with claim for refund of duty

and interest, if any, paid on such duty. Sub-section (1) provides that such

refund should be claimed by making an application before the expiry of

one year from the relevant date in such form and manner as may be

prescribed. The relevant date is provided under Explanation B and for the

facts of the present case, clause (ec) will be relevant. It provides that in

case where duty becomes refundable as a consequence of judgment,

decree, order or direction of an appellate authority, the appellate tribunal

or any Court, the date of such judgment or order will be relevant for

calculating the limitation period.

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18. The second proviso to Section 11B provides that the

limitation of one year shall not apply where any duty and interest, if any,

paid on such duty has been paid under protest.

19. As stated supra, the appeal was pending before CESTAT

and an order of stay was also granted by CESTAT and thereby, the dues

payable under Order-in-Original No.4/2012 dated 30.03.2012 was stayed

during the pendency of the appeal. Strictly speaking, when such stay

order was in force, the Order-in-Original No.30/2014 dated 06.05.2014

ought not to have been passed by including the demand made under

Order-in-Original No.4/2012 dated 30.03.2012. In fact, in the said order,

the concerned authority has taken note of the stay order passed by

CESTAT on 06.05.2013. After having taken note of this stay order, the

concerned authority has proceeded to disregard the same presumably

under the Second Proviso to Sub-section (2A) of Section 35C of the Act,

which provided that if an appeal pending is not disposed of within a

period of 180 days, the stay order shall on the expiry of the said period

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will stand vacated. The concerned authority has noted in the said order

dated 06.05.2014 that the appellant has not produced any order of further

stay. The First, Second and Third Proviso to Sub-section (2A) stood

omitted by Act 25 of 2014 with effect from 01.10.2014. It is, therefore,

contended by the learned Senior Standing Counsel for the respondent

department that the stay order can be disregarded since it is presumed to

have been vacated and hence, the demand made against the Order-in-

Original No.4/2012 dated 30.03.2012 was also included while

appropriating the rebate against the arrears of revenue.

20. At this juncture, it will be relevant to take note of the

Circular dated 04.07.2016, which came to be issued by the Department of

Revenue, Central Board of Excise and Customs, where it was decided

that from 06.08.2014 onwards no recovery will be made during the

pendency of the stay application.

21. The above submission made by the learned Senior Standing

Counsel appearing for the respondent cannot be countenanced. The

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relevant provision that was relied upon prior to the amendment makes it

clear that such interim order will stand vacated on the expiry of the only

period specified in the first proviso, only if the delay in disposing the

appeal is attributable to the party in whose favour the order of stay was

granted by the tribunal.

22. If the revenue is permitted to adopt such novel ways to

adjust the amounts by getting over an order of stay and thereby indirectly

recovering the money, it cannot be construed as a duty payable as on the

date of such appropriation. This is in view of the fact that an appeal has

been filed challenging the Order-in-Original and the same has to be

construed as a protest on the side of the appellant. In fact, the second

proviso to Section 11B specifically provides that the limitation of one

year will not apply where any duty and interest has been paid under

protest. Therefore, in the teeth of the order of stay granted by CESTAT,

that the appropriation that has been made by the department by taking

advantage of the unamended provision, at the best can only be construed

as a payment made under protest.

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23. At this juncture, it will be relevant to take note of the

judgment in Commissioner of C. EX., Chennai-II v. Electro Steel

Castings Ltd., reported in 2014 (299) ELT 305 and the relevant portion

is extracted hereunder:

"6. Though it is sought to be contended on the side of the

Revenue that the decision of the Supreme Court in the case

cited above is more applicable to the case of the Revenue, we

are not inclined to accept the same. The Apex Court in para 83

under an identical situation, dealt with the same issue, wherein

also payment was made, when the assessee has been contesting

the levy of duty for the earlier period. The Supreme Court is

compelled to say that-

Now, where a person proposes to contest his liability by way of

appeal, revision or in the higher courts, he would naturally pay

the duty, whenever he does, under protest. It is difficult to

imagine that a manufacturer would pay the duty without protest

even when he contests the levy of duty, its rate, classification or

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any other aspect...

7. That being the categorical observation of the Supreme

Court, the same is squarely applicable to the facts of the present

case in favour of the assessee, wherein also, the payment of duty

was made only during the pendency of appeal against very levy

of duty for the earlier period.

8. In other case reported in MANU/SC/0875/2003 : (2004)

13 SCC 113: 2003 (157) E.L.T. 500 (S.C.) (Derm Snuff (P) Ltd.

v. Commissioner of Central Excise, Chandigarh) relied on by

the Revenue, the Supreme Court has in para 5 dealt with the

issue relating to actual dispute involved herein, but the same

relates to cause of action. In that case, the Hon'ble Supreme

Court was called upon to decide starting date of period of

limitation, whether it is from the date on which identical third

party's case or the assessee's own case was finally decided by

the Tribunal. In the case cited above, the payment was made

under protest and the assessee originally classified the products

under sub-heading 2404.60. Whereas, the Revenue classified

the products under sub-heading 2404.50. The CESTAT in the

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case of another assessee held the same product to be classifiable

under the Heading 2404.60 and the same was accepted by the

Tribunal in favour of the assessee. On the basis of such

decision, the appellant filed the application for refund of the

duty paid under protest. In the meanwhile, the assessee's own

case involving same issue came to be decided on 28.08.2003 in

favour of the assessee on the basis of the identical finding that

the assessee's product would be classifiable under sub-heading

2404.60 and not under 2404.50. When the question to be

determined whether the cause of action for refund claim arises

after disposal of the assessee's own case or after disposal of the

third party- assessee's case, the Hon'ble Supreme Court in para 5

held mat the relevant date from which the period of limitation

starts to run is from the date on which the assessee's own case

finally decided by the Tribunal Le. on 28-8-2003. Nevertheless,

it is held that the payment of duty was made under protest was

within time and no limitation was applicable to the refund claim

of such duty and refund was hence ordered and the same was

also upheld by the Supreme Court. Thus, the facts involved in

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both the cases decided by the Supreme Court, were identical and

the Supreme Court, while dealing with the issue relating to

period of limitation, uniformly held that no limitation was

applicable to the payment made under protest. The Hon'ble

Supreme Court in the earlier judgment clearly observed that the

payment made, when the assessee has been challenging the

earlier levy of duty, is deemed to be under protest and not

otherwise. Hence, the combined appreciation of both the cases

decided by the Supreme Court would lead to an irresistible

inference that the payment made herein is also deemed to be

under protest and no limitation is applicable and the claim is

maintainable and is rightly decided by the CESTAT.

9. In the light of the above discussion, we find no

justification to interfere with the order of the Customs, Excise

and Service Tax Appellate Tribunal. The Civil Miscellaneous

Appeal is hence dismissed. Consequently, connected

Miscellaneous Petition is closed. No costs."

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24. It will also be relevant to take note of the judgment of the

Bombay High Court in S. and H. Gears Pvt. Ltd. v. Commissioner of

Customs, reported in 2004 (167) ELT 538, where it was held that the

very filing of an appeal against an assessment order amounts to payment

of duty under protest. A similar view was taken by the Delhi High Court

in Hutchisom Max Telecom Pvt. Ltd. Commissioner of Central Excise,

reported in 2004 (165) ELT 175, wherein it was held that filing of an

appeal itself amounts to protest and hence, the refund cannot be denied

on the ground of limitation when the dis allowance of the benefits of the

notification was challenged by the assessee and such benefit was finally

allowed by the tribunal.

25. At the risk of repetition, it has to be held that the

appropriation was done by the department when the appeal was pending

before CESTAT and an order of stay of recovery was also granted. Even

if the department wants to justify this appropriation by relying upon the

law as it stood prior to the amendment which came into effect from

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01.10.2014, such appropriation will be construed as a payment of duty

under protest. In such an event, the second proviso to Section 11B of the

Act will come into play and the limitation of one year will not apply

where the duty and interest has been paid under protest. Consequently,

the amount that was appropriated pursuant to the Order-in-Original No.

4/2012 dated 30.03.2012, cannot be brought under Explanation (ec) of

Section 11B of the Act and therefore, the limitation as prescribed under

Sub-section (1) of Section 11B will not apply for the refund sought for

by the appellant. Consequently, the refund sought for by the appellant is

not barred by limitation. Both the substantial questions of law are

answered accordingly in favour of the appellant.

26. The last issue pertains to the objection raised on the side of

the department to the effect that the writ petitions filed in WP(MD) Nos.

11682 and 11683 of 2014 and 3287 of 2015 which was closed by an

order dated 22.07.2019 forecloses the attempt made by the appellant to

collaterally question the appropriation order dated 06.05.2014. The writ

petition that was filed by the appellant questioning the appropriation

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order was an independent relief sought for not only covering the Order-

in-Original No.4/2012 dated 30.03.2012, but also two other orders

passed. Refund was made by the department and the appellant was under

the impression that the refund has been made towards all amounts

appropriated. Therefore, it was informed to this Court that hab the refund

has been obtained and nothing survives for adjudication. Recording the

same, the writ petitions were closed on 22.07.2019.

27. The above order does not have any bearing in the issue

involved in the present appeal. This Court is not testing the appropriation

order passed by the competent authority. On the other hand, this Court is

only testing the effect of such an appropriation order passed during the

pendency of an appeal where an order of stay was also granted. This

Court has already held that such appropriation made during pendency of

the appeal will be construed as the payment of duty under protest and as

a consequence, the period of limitation will not apply. Accordingly, this

objection that was raised on the side of the department also stands

rejected.

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28. In the result, this appeal stands allowed and the impugned

proceeding of the CESTAT in Final Order No.42294/2021, dated

08.09.2021 shall stand set aside and consequently, there shall be a

direction to the respondent to refund the amount for which the appellant

is entitled pursuant to the demand that arose in Order-in-Original No.

4/2012 dated 30.03.2012, within a period of six weeks from the date of

receipt of a copy of this judgment. There shall be no order as to costs.

[N.A.V., J.] [K.K.R.K., J.]

08.04.2026

NCC :Yes/No

Index :Yes/No

PKN

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To

1. The Commissioner of GST and Central Excise,

Tiruchirappalli Commissionerate,

No.1, Williams Road,

Cantonment,

Tiruchirappalli - 620 001.

2. The Customs, Escise and Service Tax Appellate Tribunal,

Chennai.

3.The Record Keeper (Vernacular Records),

Madurai Bench of Madras High Court,

Madurai.

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C.M.A(MD)No.368 of 2022

N. ANAND VENKATESH,J.

AND

K.K.RAMAKRISHNAN,J.

PKN

C.M.A(MD)No.368 of 2022

08.04.2026

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