• Dated 25^th July, 2025

CESTAT Upholds Refund Claims: Prevents Revenue from Challenging Consequential Orders After Accepting Substantive Rulings

Brief Facts:

Import of glazing lines, rectification lines, and grinding media from Italy and Barcelona was made by an import under the Project Import Scheme. After provisional assessment and clearance, the final assessment was completed on 18.10.2006, but no adjustment order was made as required. The company filed a refund claim on 29.06.2007, which was rejected as time-barred. On appeal, the First Appellate Authority set aside the rejection in Order-in-Appeal directing fresh consideration. Following this direction, the Assistant Commissioner passed a speaking order ordering refund, and subsequently sanctioned the refund. However, the Revenue challenged only the latter order, which the First Appellate Authority incorrectly set aside earlier, prompting the present appeal before CESTAT.

Assessee's Contention:

The Assessee contended that the Revenue's challenge was misplaced, as they had already accepted the substantive speaking order that directed the refund. The order dated 16.11.2011 was merely a consequential/giving effect order, and the Revenue could not be permitted to challenge a consequential order while accepting the main order that formed its foundation.

Department's Contention:

The Department challenged the refund sanction order dated 16.11.2011 before the Commissioner (Appeals), arguing against the validity of the refund claim. The Revenue succeeded in getting the sanctioning order set aside by the First Appellate Authority, despite having earlier accepted the substantive order directing the refund.

Decision:

The Hon'ble CESTAT Chennai allowed the appeal and set aside the First Appellate Authority's order. The Tribunal held that the order dated 15.12.2010 was the substantive "speaking order" directing refund, while the order dated 16.11.2011 was merely a consequential order giving effect to the earlier direction. Since the Revenue had not challenged the Order-in-Appeal dated 13.07.2009 nor the speaking order dated 15.12.2010, they could not be permitted to challenge only the consequential order. The Tribunal emphasized that setting aside a consequential order cannot shake the foundation laid down by an unchallenged speaking order, and held that the appellant's refund claim was valid and in order.

BTA's Comment:

The aforesaid ruling establishes an important precedent regarding the Revenue's ability to selectively challenge orders in refund matters. The Tribunal's decision reflects sound judicial reasoning by distinguishing between substantive orders and consequential orders, preventing the Revenue from adopting an inconsistent approach of accepting main orders while challenging their natural consequences.

This judgment reinforces the principle that parties cannot approbate and reprobate - having accepted or not challenged the substantive order directing refund, the Revenue cannot subsequently challenge the mechanical order that merely gives effect to that direction. The decision promotes finality in litigation and prevents harassment of taxpayers through selective appeals against consequential orders while leaving the foundational orders unchallenged. This ruling provides valuable protection to assessees against frivolous Revenue appeals and ensures that once substantive relief is granted and accepted, its implementation cannot be frustrated through challenges in connection with purely consequential orders.

Author: Bijay Kumar Sharma

Edited by: Shaily Gupta