2020 (1) TMI 1095 - AT - Central Excise

Service of SCN - Refund of CENVAT credit - area based exemption - benefit of N/N. 56/2002-CE dated 14.11.2002 - refund claim was rejected by the authorities below on the ground that the appellant has deposited the amount under dispute voluntarily in a bonafide manner - HELD THAT - The appellant has intimated that they have availed credit of ₹ 36,57,968/- during the period from 16.6.1997 to 03.9.1997 on seven bills of entries for inputs imported on payment of CVD duty. It is also admitted position that the amount ₹ 18,28,984/- has been paid by the appellant under protest on various dates. It is a fact on record that that equal amount has been deducted from the refund claim sanctioned to the appellant. It is also admitted position that no show cause notice has been issued to the appellant for appropriation of the said amount paid by the appellant. On going through the facts of the case, it is admitted position that the credit was availed by the appellant during the period from 16.6.1997 to 03.9.1997 and through letter dated 25.2.2005 (which is almost after passing of more than seven and half years), the appellant was asked to reverse the Cenvat credit availed during the period 16.6.1997 to 03.09.1997. Reversal was made initially by the appellant under protest through a letter. Remaining amount has been adjusted from the refund claim but no proof has been produced by the Revenue that the adjustment of amount in refund claim has been communicated to the appellant. Extended period of limitation - HELD THAT - As no SCN has been issued to the appellant within five years from the date of availing of credit i.e. five years after 3.9.1997, the amount of cenvat credit availed wrongly cannot be recovered from the appellant. Therefore, at this stage, if it is directed to the Revenue to issue show cause notice and time consumed in litigation between 25.2.2005 (when it was found that the appellant has taken credit wrongly) till date if the time is excluded also, no purpose will be serve if a show cause notice is issued to the appellant for appropriation of the amount of Cenvat credit as on date as the letter dated 25.2.2005 issued by the department to the appellant clearly shows that the credit has been availed by the appellant wrongly - In that circumstance, the extended period of limitation is not invokable. Admittedly, no SCN has been issued to the appellant and the amount was paid by the appellant under protest. The refund claim cannot be rejected on the ground that the appellant has vacated the issuance of the SCN. In that circumstance, the amount recovered from the appellant is required to be refunded to them - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Refund claim rejection based on voluntary deposit
- Requirement of show cause notice for appropriation of amount
- Applicability of interest liability
- Eligibility of recovery of ineligible credit
- Finality of refund orders and revival of claims

Issue 1: Refund claim rejection based on voluntary deposit
The appellant appealed against the rejection of their refund claim by the authorities below. The appellant had availed cenvat credit but later voluntarily debited an amount under protest. The authorities rejected the refund claim stating that the appellant had deposited the amount voluntarily and in a bonafide manner. The appellant argued that no show cause notice was issued for the appropriation of the amount, citing relevant legal precedents. The appellant contended that the deposit made was not tax but an amount, and therefore, the refund claim should be sanctioned.

Issue 2: Requirement of show cause notice for appropriation of amount
The appellant emphasized that no show cause notice had been issued to them for the appropriation of the amount in question. They argued that the absence of a show cause notice meant that the amount should be refunded to them, relying on previous court judgments. The appellant maintained that the amount was paid under protest, and the voluntary deposit did not negate the need for a show cause notice for appropriation.

Issue 3: Applicability of interest liability
The appellant asserted that since the payments were made beyond the statutory period of 5 years before any show cause notice was issued, interest liability should not be attracted. They contended that recovery of ineligible credit, in this case, should not be considered as duty, especially when the credit was taken on eligible import duties. The appellant prayed for the refund claim to be sanctioned based on these arguments.

Issue 4: Eligibility of recovery of ineligible credit
The appellant argued that the recovery of ineligible credit, in this case, should not be equated to duty, particularly since the credit was taken on eligible import duties and not Central Excise duties. They emphasized that the refund claim should be allowed as the recovery of the amount was not justified under the circumstances presented.

Issue 5: Finality of refund orders and revival of claims
The respondent opposed the appellant's contentions, highlighting that the appellant had not filed any appeal against the refund orders where a certain amount was claimed to be deducted by the department. The respondent argued that the refund could not be claimed at this stage, as the orders had attained finality. The respondent also pointed out that the appellant had acknowledged the deductions made by the department and had received cheques for the balance amount from the refund claim. Therefore, the respondent prayed for the rejection of the refund claim.

In the judgment, the Member (Judicial) analyzed the arguments presented by both parties. The Member noted that no show cause notice had been issued to the appellant for the appropriation of the amount paid by them. The Member examined the correspondence between the parties and concluded that the appellant's deposit was made under protest, and the absence of a show cause notice rendered the recovery of the amount invalid. The Member referred to legal precedents and held that the refund claim could not be rejected based on the appellant vacating the issuance of a show cause notice. Consequently, the impugned order was set aside, and the appeal was allowed with consequential relief, if any.