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CESTAT Chandigarh Remands Dabur India Demands Back, Citing Ignored Value Addition Rates and Duplicate Recovery
In a significant ruling that chastises the revenue department for working in "different silos," the , has remanded a batch of twelve appeals involving M/s Dabur India Ltd. The tribunal directed the appellate authority to recalculate excise duty and self-credit demands of approximately ₹11.4 crore , after accounting for special rates of value addition fixed for the company's Jammu units and addressing what it termed "" arising from duplicate recovery.
A bench comprising Hon'ble Mr. S.S. Garg, Member (Judicial) , and Hon'ble Mr. P. Anjani Kumar, Member (Technical) , pronounced the order on , allowing the appeals by way of remand.
A decade-long tax dispute in the Valley
Dabur India Ltd operates two manufacturing units—Unit I and Unit II—in the SIDCO Industrial Complex, Bari Brahmana, Jammu, producing hair oils, shampoos, perfumes, and toiletries. The company availed the area-based exemption under dated , designed to incentivize industrial development in Jammu & Kashmir.
However, the Government subsequently issued () and (), which restricted the refund of excise duty to the actual value addition achieved by the manufacturer and provided for fixation of special rates of value addition. Dabur, along with other assessees, challenged the of these amending notifications before the . The matter ultimately culminated in the 's decision in , which upheld the constitutional validity of the restricted notifications.
Following this verdict, Dabur approached the Department seeking fixation of special rates of value addition for its various products, and such rates were duly fixed—for Unit I through orders dated , and , and for Unit II through an order dated .
When the left hand didn't know what the right was doing
While the fixation proceedings were in progress, the Department issued show-cause notices to Dabur demanding repayment of refunds or self-credit availed
"over and above the value addition prescribed in the amending notification."
The demands were confirmed by the Commissioner (Appeals) through two impugned orders—one dated
, covering Unit I, and another dated
, covering Unit II.
For Unit I , the Department demanded ₹3,45,51,917 towards repayment of self-credit and an additional ₹12,41,024 as excise duty for periods spanning September 2009 to November 2012. For Unit II , the demand was ₹5,40,88,445 towards self-credit and ₹2,42,98,977 as excise duty for periods from September 2009 to November 2012.
Critically, in five of the appeals—E/60460/2024, E/60450/2024, E/60454/2024, E/60455/2024, and E/60453/2024—the Department had demanded recovery twice: once on account of the excess self-credit availed and again on the excise duty paid through that very credit for subsequent clearances.
"One of them can only be demanded back"
Appearing for Dabur, Advocates and submitted that the impugned orders were passed in complete disregard of the special rates of value addition already fixed by the competent authority. They contended that the Supreme Court in VVF Ltd. had clarified that authorities must give effect to all requirements and conditions contained in the amending notifications, and that the special rates fixed ought to have been the basis for computing any legitimate demand. Since the demand itself was unsustainable, they argued, interest was not payable either.
On the duplication issue, counsel cited the precedents of and , both of which held that demanding both the excess refund and the duty paid through utilization of that credit amounts to impermissible double recovery.
The Department's Authorized Representatives, and , reiterated the findings of the impugned order but fairly conceded that the matter should be remanded for recalculation after giving due allowance to the special value addition fixed by the competent authority.
Key observations: rebuke and remedy
The tribunal minced no words in critiquing the Department's handling of the proceedings:
"We find that the impugned proceedings are result of the working of the Department in different silos where the left hand is not aware of what the right hand was doing. While it is understandable that the Department issued demands to protect the revenue's interest where the appellants have availed excess self-credit than is permitted in the amending notifications, though justifiably the Department waited till the final word on the issue was spelt out by the Hon'ble Apex Court, in the case of VVF Ltd., they could have also taken care to see whether any applications for fixation of special value addition in terms of the notifications cited above were made by the appellant and were decided by the competent authority. Such a step would have gone a long way to reduce litigation at various levels."
On the merits, the Bench observed:
"Having passed the orders confirming the demands, not keeping in mind the special value addition fixed by the competent authority, the respective authorities are required to re-do the whole exercise."
On the issue of duplication, the tribunal held firmly:
"Demanding both the excess refund and utilization of credit amounts to causing to the assessees/appellants. We are of the considered opinion that one of them can only be demanded back."
What happens next
The tribunal allowed all twelve appeals by way of remand, directing the appellate authority to recalculate the demands afresh, taking into account: - The special rates of value addition fixed by the competent authority for both Units I and II, and - The tribunal's observations on duplicity of demand in the specified appeals, ensuring recovery of only one component where duplication exists.
The practical effect of this order is that Dabur India Ltd is entitled to have its liabilities computed on the basis of the special rates that were ultimately fixed, which could substantially reduce—or potentially eliminate—the total demand of roughly ₹11.4 crore. For the Revenue, the remand serves as a procedural caution: future confirmations of demand must be preceded by due diligence on pending applications for special rate fixation, lest they be sent back for a costly re-do.
The order was pronounced in open court on .
