Facts of the Case

The petitioner, BlackBerry India Pvt. Ltd., challenged a Show Cause Notice dated 19.01.2024 issued by the department seeking recovery of:

  • Refund of CENVAT Credit amounting to ₹8,55,34,345/-
  • Interest on delayed refund amounting to ₹4,69,83,731/-
  • Along with applicable interest and penalty

The refund had originally been granted pursuant to:

  1. A favorable order by CESTAT allowing the refund claim.
  2. A subsequent Delhi High Court order directing payment of interest on delayed refund.

Despite these concluded proceedings, the department issued a fresh Show Cause Notice seeking recovery on the ground that it intended to challenge the High Court judgment before the Supreme Court.

Issues Involved

  1. Whether the department can recover refund and interest already granted pursuant to final judicial orders.
  2. Whether filing or proposing to file a Special Leave Petition (SLP) justifies issuance of a recovery notice.
  3. Whether such Show Cause Notice is legally sustainable.

Petitioner’s Arguments

  • The refund and interest were granted pursuant to binding judicial orders of CESTAT and the High Court.
  • The department’s challenge to the Tribunal order had already been dismissed by the High Court.
  • Mere intention to file an SLP does not invalidate or stay the operation of existing orders.
  • The Show Cause Notice is arbitrary and without jurisdiction.

Respondent’s Arguments

  • The department contended that it had initiated steps to file an SLP before the Supreme Court.
  • On this basis, it claimed that the interest paid on delayed refund was liable to be recovered. 

Court’s Findings / Order

The Delhi High Court held:

  • The refund and interest were granted pursuant to valid and binding judicial orders.
  • The department’s appeal against the Tribunal order had already been dismissed, with no substantial question of law found.
  • Filing or proposing to file an SLP does not permit the department to unilaterally treat the refund as erroneous.
  • Recovery cannot be initiated unless the Supreme Court grants relief or sets aside the earlier orders.

Final Order

  • The Show Cause Notice dated 19.01.2024 was quashed.
  • No costs were imposed.

Important Clarification by the Court

  • The department cannot independently declare a refund as erroneous after losing before the High Court.
  • Any recovery action must be backed by a valid judicial order, not merely by a proposed SLP.
  • The appropriate remedy for the department is to seek interim relief from the Supreme Court.

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/SAS18032024CW40292024_133418.pdf 

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