2015 (2) TMI 83 - AT - Central Excise

Adjustment of refund with interest due on belated duty - Held that - Advocate has drawn my attention to letter dated 29-3-2012 addressed by the Superintendent to the appellant giving details of interest against which the balance amount of rebate of ₹ 8,01,573/- was adjusted. The said letter also mentions that higher officers at the relevant time were of the opinion that no show cause notice be issued for recovery of interest, hence no show cause notice was issued for the above amount. Learned Advocate has also made a statement at bar that even subsequent to the said letter, they have not been issued a show cause notice for confirmation of any demand of interest. It is well settled law that any demands from an assessee are required to follow the principle of natural justice, which includes issuance of show cause notice, affording a reasonable opportunity to the assessee to put forward its case and adjudicating the matter thereof. Such type of interest confirmation without following due principles of natural justice cannot be appreciated inasmuch as they represent only one sided view of the Revenue. As such, the adjustment of sanctioned rebate claims against the interest amount, which never stand adjudicated by the department, cannot be upheld in terms of law declared by the Hon ble Karnataka High Court 2011 (3) TMI 571 - KARNATAKA HIGH COURT . Accordingly, all the appeals are allowed to the extent of rebate claim of ₹ 8,01,573/- with consequential relief to the appellants.

Summary

Issues:
Adjustment of sanctioned rebate against confirmed demand of interest without proper adjudication and issuance of show cause notice.

Analysis:
The judgment involves the disposal of three appeals with identical issues regarding the adjustment of sanctioned rebate claims against confirmed demand of interest without proper adjudication. The appellant had filed three refund claims totaling Rs. 9,24,949, which were sanctioned but adjusted against a confirmed demand of Rs. 33,09,081. The original adjudicating authority observed that the appellant had deposited Rs. 31,85,705, and the sanctioned rebate was adjusted towards the unpaid demand of Rs. 1,23,376. The balance rebate was confirmed against demands of interest, which the Revenue believed the assessee owed.

The learned Advocate did not dispute the adjustment of Rs. 1,23,376 but argued that it should be subject to the outcome of their appeal pending before the Supreme Court. Regarding the balance amount, the Advocate contended that without a show cause notice, adjudication proceedings, or confirmation of demand by the proper officer, adjusting rebate claims against unconfirmed demand was unjustified. The Advocate cited various Tribunal decisions to support this argument.

A crucial reference was made to the Tribunal's decision in Stella Rubber Works v. CCE, Bangalore, where it was held that sanctioned rebate claims cannot be adjusted against unconfirmed demands if no show cause notice demanding interest was issued. The decision was confirmed by the Hon'ble Karnataka High Court, which imposed a penalty on the Revenue for unjustified actions. The facts of the present case mirrored those in the Stella Rubber Works case, with the Advocate highlighting a letter from the Superintendent detailing the interest against which the rebate was adjusted without proper procedures being followed.

The judgment emphasized the importance of natural justice principles, stating that demands from an assessee must follow these principles, including the issuance of show cause notices and providing a reasonable opportunity to present their case. The adjustment of sanctioned rebate against interest amounts that were not adjudicated by the department was deemed unacceptable, following the legal precedent set by the Hon'ble Karnataka High Court. As a result, all appeals were allowed to the extent of the rebate claim of Rs. 8,01,573, with consequential relief granted to the appellants.