Cess paid under one excise registration cannot be adjusted against liability under another.

The appellant manufactured tea and held two Central Excise registrations: one for Unit 2 and another for its Expansion unit.

For February 2015 to September 2016, it filed returns under the Expansion unit’s registration but deposited the Tea Cess of ₹9,67,129 under the Unit 2 registration.

The appellant maintained that the payment under the sister unit’s registration resulted from an accountant’s bona fide clerical error.

The adjudicating authority confirmed the cess demand with interest and imposed a penalty of ₹96,713 under Section 11AC(1)(a) of the Central Excise Act, 1944; the Commissioner (Appeals) upheld that order.

The appellant appealed to the Tribunal, seeking adjustment of the amount already paid and contesting the penalty.

1. Whether Tea Cess paid under the sister unit’s separate Central Excise registration could be adjusted against the liability of the Expansion unit.

2. Whether a penalty was imposable where the payment was made under the sister unit’s registration due to a bona fide clerical error and there was no intention to evade payment.

The Tribunal considered Rules 4 and 8 of the Central Excise Rules, 2002, concerning payment of duty, and Sections 11A and 11AC of the Central Excise Act, 1944, concerning recovery of unpaid duty and penalty.

It held that statutory duty or cess paid under one distinct Central Excise registration cannot be cross-adjusted against the liability under another registration.

It also concluded, on the circumstances before it, that a bona fide clerical error and absence of intent to evade payment warranted setting aside the penalty.

No precedent was cited.

The returns for the Expansion unit showed clearances under that unit’s registration, while the corresponding cess had been deposited under the separate registration of Unit 2.

Because the registrations were distinct, the Tribunal rejected the appellant’s request to treat the payment under Unit 2’s registration as payment of the Expansion unit’s liability and directed payment of the confirmed cess with applicable interest.

However, it accepted the explanation that the misallocation resulted from a bona fide clerical error and found no intention to evade duty; it therefore set aside the penalty.

The penalty was set aside.

The appellant was permitted to seek a refund of the cess deposited under Unit 2’s registration, with the limitation period for filing the refund application to run from receipt of the Tribunal’s order.

The respondent’s cross-objection was also disposed of.