Back
CESTAT Ahmedabad Rules ₹54 Lakh Recovery Against Panasonic Life Solutions India
The has set aside a recovery demand of ₹54,00,034 against Panasonic Life Solutions India Private Limited, ruling that the issued nearly six years after the credit was taken was . The bench comprising Judicial Member Dr. Ajaya Krishna Vishvesha and Technical Member Satendra Vikram Singh also strongly criticised the department for its inaction on the company's pending refund application.
Background: Annual Refund Claim and Department's Silence
Panasonic, which manufactures goods such as glass shells, wires and cables at its Kutch unit, was availing exemption under . Under this notification, eligible manufacturers can claim refund of duty equivalent to the value addition. The company opted for the scheme under paragraph 2C, which allows manufacturers to take credit of the monthly refundable amount in their .
For the financial year 2008-09, Panasonic filed a statement for annual differential refund of ₹54,00,034 with the jurisdictional Assistant Commissioner on . Under of the notification, the Assistant Commissioner was required to decide the refund not later than . However, the department never communicated any decision. After waiting nearly a year, in , Panasonic suo-moto took credit of the differential amount in its .
Limitation Under the Notification and Section 11A
The department issued a on , alleging that Panasonic had violated the notification by taking credit without the Assistant Commissioner's determination. The notice sought recovery of the amount under , along with interest and penalty.
Panasonic argued that the notice was hopelessly
. The credit was taken in
, and the notice came after almost six years.
of the notification makes any irregular or excess credit recoverable
"as if it is a recovery of duty of excise
"
. Section 11A provides a maximum
from the relevant date for issuing such notices, starting from the date of refund. Since the credit was taken in
, the five-year window had already closed by the time the notice was issued in February 2016.
"Entire Proceedings Unsustainable": Tribunal's Reasoning
The Tribunal fully accepted the limitation argument. It observed that
read with Section 11A clearly limits the
to five years.
"A combined reading of
and
clearly reveals that
for recovery of refund granted erroneously to a manufacturer, can be issued within 5 years from the date of refund,"
the bench noted.
It consequently held:
"We therefore, hold that the entire proceedings emanating from a time barred
, are not sustainable. Therefore,
can be set aside on limitation itself without going into merits of the case."
On the merits, the Tribunal also found in favour of Panasonic. It noted that the company had submitted its annual refund statement on
but the Assistant Commissioner failed to decide the application within the prescribed period.
"When no decision was communicated for almost one year, the appellant took
of duty in
. Therefore, appellant has acted as per provisions of the notification and hence, cannot be faulted with,"
the bench recorded.
The Tribunal distinguished the cases relied on by the revenue— , , and —which involved impermissible suo-moto adjustments in different contexts. It emphasised that the present case arose under Notification 39/2001-CE, which specifically allows manufacturers to take credit in the subject to subsequent verification by the department.
Criticism of Department's Inaction
The Tribunal did not mince words in calling out the department's failure. It noted that when the bench enquired about the status of Panasonic’s refund application, the
initially stated that the records could not be located. Even a subsequent report in February 2026 said it
"cannot be categorically stated whether the refund claim… is pending or has been disposed of."
The bench observed that this did not speak well of the functioning of the division office.
"Instead of timely disposal of refund application submitted by the appellant, the division Assistant Commissioner kept quiet for several years and when the issue was raised by audit, they proceeded to issue
after 6 years to save themselves,"
the judgment recorded.
The Tribunal directed the jurisdictional Chief Commissioner to enquire into the reasons for the officers' inaction and take corrective measures.
Final Decision
The CESTAT set aside the and allowed Panasonic's appeal, holding that the demand failed both on limitation and on merits. The recovery of ₹54,00,034 along with interest and penalty under was quashed. The bench pronounced the order in open court on .
The ruling reinforces that even under special exemption notifications, the department cannot sit on refund applications for years and subsequently issue recovery notices. It also underscores that where a manufacturer acts in accordance with the notification's mechanism but is let down by the department's procedural lapses, the burden cannot be shifted to the assessee.
