The bench, comprising Judicial Member R. Muralidhar and Technical Member K. Anpazhakan, held that the refunds were valid and that the Revenue had no authority to reopen finalized orders.
The dispute arose from a show cause notice dated 19 October 2016, in which the department alleged that Sun Pharma had wrongly availed refund benefits totaling Rs 82,84,25,639 under Notification No. 56/2003-CE, though its Sikkim unit had commenced commercial production in April 2009, after the cut-off date of March 31, 2007.
The company had established its unit in 2005-06 and began production in April 2009, claiming exemption on 100% duty re-credit based on the Sikkim Industrial Policy and the Jammu and Kashmir High Court ruling in Reckitt Benckiser vs. UOI (2011).
The Commissioner of Central GST and Excise, Siliguri, in 2021, confirmed the demand with interest under Sections 11A(10) and 11AA of the Central Excise Act, prompting the present appeal before CESTAT.
Sun Pharma, represented by consultant Ashok Nawal, contended that it had inadvertently cited the wrong exemption notification (56/2003 instead of 20/2007) when filing its monthly refund claims. The company maintained that both notifications were identical in scope and substance, except for the difference in eligible production periods 2003-2007 and 2007-2017 respectively.
Citing the Supreme Court judgment in _Share Medical Care vs Union of India (2007), Sun Pharma argued that “even if an applicant does not claim benefit under a particular notification at the initial stage, he is not debarred, prohibited or estopped from claiming such benefit at a later stage.”
The firm also pointed out that from September 2015 onward, it had correctly filed claims under Notification 20/2007, which were duly sanctioned, proving the department itself accepted its eligibility.
Arguing for the department, Special Counsel P.R.V. Ramanan countered that Sun Pharma had knowingly claimed benefits under the wrong notification for several years and could not later change its stance.
He submitted that the firm’s production began after the eligibility period of Notification 56/2003, making the refunds legally inadmissible, and that the demand under Section 11A was justified to recover erroneous refunds.
Ramanan also maintained that the Supreme Court’s 2020 ruling (Union of India vs Reckitt Benckiser) had quashed the Sikkim High Court’s 2017 decision on promissory estoppel; hence, Sun Pharma could not rely on the earlier High Court ruling to sustain its claim.
The Tribunal, after detailed examination, found that both exemption notifications were materially identical and intended to continue the same industrial benefit across two policy periods.
“The only difference,” the bench observed, “is that industries commencing production between 23.12.2002 and 31.03.2007 are entitled to benefit under Notification 56/2003-CE, whereas industries commencing between 01.04.2007 and 31.03.2017 are entitled under Notification 20/2007-CE.”
It further emphasized that Sun Pharma had complied with all conditions of Notification 20/2007, and “the inadvertent error in wrong mentioning of the Notification No. 56/2003 would not disentitle them from availing the benefit of Notification No. 20/2007 which is otherwise entitled to them.”
Importantly, the Tribunal noted that all refund orders were formally sanctioned through adjudicated Orders-in-Original, which were never appealed by the department. Hence, it ruled that the Revenue could not reopen them through a show cause notice under Section 11A.
Quoting the Madras High Court in Eveready Industries India Ltd. vs CESTAT (2016), the bench held:
“Once an application for refund is allowed under Section 11B, the expression ‘erroneous refund’ appearing in sub-section (1) of Section 11A cannot be applied. One authority cannot be allowed to say in a collateral proceeding that what was done by another authority was an erroneous thing.”
Subsequently, setting aside the Commissioner’s order, the bench declared the Revenue’s action “legally not sustainable” and fully allowed Sun Pharma’s appeal.
“We thus hold that the appellant is eligible for the refund and consequently, the demand on account of the alleged erroneous refund in the impugned order is set aside,” the bench concluded.
Also Read: Ongoing Sale of Covid-Era Liposomal Amphotericin B Challenged, SC Seeks Response from Top Pharma Firms, DCGI
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