2007 (3) TMI 251 - AT - Central Excise

Order of recovery of amount erroneously refunded - just filing an appeal under Section 35E (2) of the Central Excise Act will not suffice for the recovery of erroneous refund but simultaneous issuance of show cause notice u/s 11A has to be undertaken by the Revenue - impugned order ordering the recovery of the erroneous refund from the appellant is liable to be set aside

Summary

Issues:
1. Refund claim by the appellant for duty involved on reprocessed and exported goods.
2. Validity of the order-in-appeal setting aside the refund sanctioned to the appellant.
3. Necessity of issuing a show cause notice for recovery of erroneous refund.
4. Legal requirements for the recovery of erroneous refund under Central Excise Act.

Analysis:
1. The appellant, a 100% E.O.U., cleared duty paid goods to a purchaser, which were later rejected and returned. The appellant reprocessed and exported the goods with a 5% loss. A refund claim was filed for the duty involved, which was initially sanctioned by the adjudicating authority. The Revenue appealed, contending that cash refund was not permissible under Central Excise Rules for E.O.U. The Commissioner (Appeals) set aside the refund, leading to the current appeal.

2. The appellant argued that the order-in-appeal was unsustainable as no show cause notice was issued for the recovery of the refund amount. The appellant relied on relevant case laws to support the position that a show cause notice under Section 11A was necessary before concluding on the recoverability of the refund. The Revenue, however, contended that the appeal itself indicated grounds for recovery, citing a High Court decision to support their stance.

3. The Tribunal examined the submissions and records, emphasizing that the appellant had followed all procedures for reprocessing and exporting the goods. The Tribunal noted that the Commissioner (Appeals) had concluded the refund was erroneous without issuing a show cause notice. Referring to previous decisions, the Tribunal highlighted the necessity of simultaneous initiation of recovery proceedings under Section 11A and Section 35E(2) for erroneous refunds.

4. Relying on the Division Bench's decisions, the Tribunal underscored that merely filing an appeal under Section 35E(2) was insufficient for refund recovery. The Tribunal set aside the order-in-appeal, emphasizing the need for the Revenue to initiate recovery proceedings concurrently under both relevant sections. The Tribunal differentiated the case from a High Court decision where refund recovery was based on different circumstances, ultimately allowing the appeal and overturning the order for recovery of the erroneous refund.

This detailed analysis highlights the legal nuances and precedents considered by the Tribunal in reaching its decision to set aside the order-in-appeal and allow the appellant's appeal regarding the recovery of the erroneous refund.