2019 (3) TMI 1735 - AT - Central Excise

Recovery of erroneous Refund of excise duty paid - issuance of protective SCN - method of valuation of free physician samples - appellant was paying excise duty on the pro rata of the trade value of the trade pack. As per the Circular No. 643/34/2002-CX, dated 1-7-2002 it was clarified that the excise duty on removal of free physician samples should be on the value at cost construction method i.e. 115% of cost of manufacture, refund was claimed for differential amount and was granted - later on Circular issued on 1-7-2002 was superseded by Circular No. 813/10/2005-CX, dated 25-4-2005 - whether the Circular will have retrospective effect or prospective effect. HELD THAT - There is no dispute that initially refund was sanctioned only as a compliance of this Tribunal s order wherein the refund matter was finally decided in favour of the appellant. Since Revenue had not filed any appeal against the said Tribunal s order, the eligibility of the refund attained finality. Thereafter, neither refund can be denied nor any recovery of the said refund can be made. Revenue had no authority to issue a protective SCN as the Revenue was bound by the Tribunal s order whereby the refund matter was finally decided. Therefore, the issuance of the protective SCN is ab initio illegal, hence the same will not sustain. Appeal allowed - decided in favor of appellant.

Summary

Issues involved:
1. Refund claim on excise duty for clearance of free physician samples.
2. Validity of protective show cause notice (SCN) for recovery of erroneous refund.

Analysis:

1. Refund Claim on Excise Duty:
The appellant, engaged in medicament manufacture, paid excise duty on free physician samples based on Circular No. 643/34/2002-CX, valuing them at 115% of cost of manufacture. An excess payment was identified, leading to a refund claim. The claim was rejected initially but allowed by the Commissioner (Appeals). The Revenue challenged this before the Tribunal, which dismissed the appeal. Following this, the adjudicating authority sanctioned the refund claim as per the Tribunal's order. However, the Revenue, dissatisfied, appealed again, which was withdrawn later. A protective SCN for erroneous refund recovery was issued, confirmed by the adjudicating authority, leading to the appellant's appeal before the Commissioner (Appeals), which was rejected, prompting the present appeal.

2. Validity of Protective SCN:
The appellant argued that the issue of valuation for excise duty had been settled in their favor, with refund sanctioned and upheld by the Tribunal without any appeal by the Revenue to the Supreme Court. The appellant contended that Circular No. 813/10/2005-CX, superseding the 2002 Circular, was not applicable retrospectively, and the benefit should continue during the Circular's validity period. The Tribunal found that since the refund matter was conclusively decided in the appellant's favor without any appeal from the Revenue, the eligibility for refund was finalized. The Tribunal held that the Revenue had no authority to issue a protective SCN, deeming it illegal ab initio. Consequently, the Tribunal set aside the impugned order and allowed the appeal solely based on the Tribunal's previous decision in the appellant's case, without delving into the circular's applicability from 2002-2005.

In conclusion, the Tribunal ruled in favor of the appellant, upholding the refund claim and rejecting the validity of the protective SCN issued by the Revenue for recovery of the erroneous refund. The decision emphasized the finality of the Tribunal's order in determining the eligibility for refund and the Revenue's lack of authority to challenge it through a protective SCN.