2017 (7) TMI 323 - AT - Central Excise

Recovery of interest amount in respect of rebate claim, without issuance of SCN - Held that - Out of the sanctioned rebate amount, an amount of ₹ 26,76,321/- was adjusted by the Asstt. Commissioner towards interest liability, relatable to earlier erroneous refund. Such action on the part of the Department, does not appears to be is in conformity with the statutory provisions, inasmuch as, for recovery of the interest amount, no SCN was issued by the Department, as provided under section 11A of the CEA, 1944 - once it has been held that the appellant is entitled for rebate claim, in absence of any specific provision for recovery of interest amount there-from, suo motu recovery of such amount by the Department is contrary to the statutory provisions - appeal allowed - decided in favor of appellant.

Summary

Issues:
Recovery of interest amount in rebate claim without show cause notice.

Analysis:
The case involves a dispute regarding the recovery of interest amount in relation to a rebate claim without the issuance of a show cause notice. The appellant, engaged in the manufacture of patented medicines, filed rebate claim applications amounting to a significant sum for the period 2007-2008, which were processed and sanctioned by Excise authorities. However, the department contended that an excess rebate was availed due to duty payment discrepancies. Appeals and revisions followed, leading to a demand for repayment of the disputed amount. Subsequently, an interest amount was appropriated by the Assistant Commissioner without prior notice, leading to the present appeal before the Tribunal.

The appellant argued that the recovery without a show cause notice was impermissible, citing relevant case law supporting this position. The Tribunal noted that the Department's action of adjusting the interest liability without issuing a show cause notice was not in accordance with statutory provisions. The Tribunal referenced a judgment by the Hon'ble Karnataka High Court, emphasizing that recovery of interest from a rebate claim without specific provision for such recovery is contrary to the law. It was held that the Department lacked the authority to unilaterally recover interest from the rebate claim under Rule 18 of the Central Excise Rules, 2002.

The Revenue, in response, relied on a judgment of the Hon'ble Madras High Court in a different case involving duty drawback scheme, where recovery of interest was explicitly provided. The Tribunal distinguished this case from the present situation, highlighting the specific circumstances under which interest recovery was permissible. Ultimately, the Tribunal found no merit in the impugned order and allowed the appeal in favor of the appellant, setting aside the decision. The cross objection filed by the Revenue was also disposed of accordingly, concluding the matter before the Tribunal.