Adjudicating authorities cannot disregard binding appellate findings while confirming demands on superseded orders.

The Petitioner, a 100% Export Oriented Unit, had paid excise duty of ₹76,72,000 on 36 export consignments and subsequently claimed refund of the CENVAT credit under Rule 5 of the CENVAT Credit Rules, 2004.

The refund was sanctioned on 06.05.2019. During the pendency of the Department’s appeal against that refund order, the Department issued a Demand-cum-Show Cause Notice dated 10.12.2019 seeking recovery of the same amount.

The Commissioner (Appeals) allowed the Department’s appeal on 16.12.2019, but the CESTAT subsequently set aside that order on 01.08.2024 and held that the Petitioner was entitled to the refund under Rule 5 and that the claim was not barred by limitation.

Despite being informed of the CESTAT’s decision, the Additional Commissioner confirmed the demand of ₹76,72,000 by Order-in-Original dated 24.03.2025, principally relying on the Commissioner (Appeals)’s order and findings on limitation.

The Petitioner therefore invoked the writ jurisdiction of the Delhi High Court and also sought refund of the ₹7,67,200 pre-deposit made before the CESTAT.

1. Whether the Order-in-Original dated 24.03.2025 confirming recovery of ₹76,72,000 could be sustained when it relied on the Commissioner (Appeals)’s order dated 16.12.2019, which had already been set aside by the CESTAT.

2. Whether the adjudicating authority could re-determine the Petitioner’s entitlement to refund and limitation contrary to the CESTAT’s operative Final Order dated 01.08.2024.

3. Whether the Demand-cum-Show Cause Notice dated 10.12.2019 and the consequential Order-in-Original were liable to be quashed in light of the subsequent appellate adjudication.

4. Whether the Petitioner was entitled to refund of the ₹7,67,200 pre-deposit, together with applicable interest, after succeeding before the CESTAT.

The Court applied Rule 5 of the CENVAT Credit Rules, 2004, which permits refund of accumulated CENVAT credit attributable to exported goods, and recognised the statutory scheme concerning rebate under Rule 18 and export under bond under Rule 19 of the Central Excise Rules, 2002.

Section 11B of the Central Excise Act, 1944, governing refund claims and limitation, was relevant to the limitation issue; however, the CESTAT had already held that the Petitioner’s claim was not time-barred.

The Court applied the principle that an adjudicating authority must give effect to operative orders of the competent appellate forum and cannot rely on an order that has subsequently been set aside.

It also applied the principle that a final appellate determination on the Petitioner’s substantive entitlement and limitation could not be disregarded in later adjudication of a connected demand.

The CESTAT’s Final Order dated 01.08.2024 had conclusively held that the Petitioner was entitled to refund of ₹76,72,000 under Rule 5 and that the claim was not barred by limitation.

That order had also set aside the Commissioner (Appeals)’s order dated 16.12.2019, which was the very order relied upon by the Additional Commissioner to confirm the demand.

Consequently, the Additional Commissioner could not treat the quashed appellate order as an operative determination against the Petitioner or revive the limitation objection by characterising the claim as a fresh application.

The defect was aggravated because the Petitioner had expressly brought the CESTAT’s decision to the adjudicating authority’s notice before the impugned order was passed, yet the authority failed to consider its legal effect.

The demand therefore proceeded on a legal and factual premise that no longer existed.

It held that the Additional Commissioner was bound to take into account the CESTAT’s Final Order dated 01.08.2024, which upheld the Petitioner’s refund entitlement and rejected the limitation objection.

The Respondent was further directed to refund the ₹7,67,200 pre-deposit made before the CESTAT, together with applicable interest in accordance with law.