2021 (5) TMI 868 - AT - Central Excise

Refund of Excise duty paid under protest - method of valuation of physician samples - refund application filed by the appellant was rejected by placing reliance upon the Circular dated 25.04.2005 that prescribed for payment of duty under rule 4 of the Valuation Rules - appellant followed the practice of valuation of physician samples on cost of production 10% profit and also enclosed therewith a list of products cleared on assessable value (cost 10%) - Section 11A of the Excise Act - HELD THAT - In the present case, the appellant only deposited an amount of ₹ 43,57,437 /- under protest but specifically stated that it was not accepting the contention of the department that it was required to pay differential duty from 25.04.2005 to 30.09.2006. It cannot, therefore, be urged that the appellant had deposited any amount under sub-section (1)(b) of section 11A of the Excise Act, in which case only notice was not required to be served on the appellant - it was obligatory on the part of Central Excise Officer to have issued a notice to the appellant for payment of the short paid amount of duty and, thereafter, adjudicate upon it. In the present case, however, the amount deposited by the appellant under protest has been appropriated towards differential excise duty without issuance of any notice contemplated under section 11A of the Excise Act. It has now to be seen whether an amount of ₹ 14,38,359 /- could have been appropriated as interest for alleged late payment of the amount of ₹ 43,57,427/-, which was deposited under protest (from rebates claimed and sanctioned to the appellant) - In the first instance, when the order rejecting the refund claim filed by the appellant has been set aside and the appellant is entitled to the refund amount, there is no reason as to why the appellant should be asked to pay any interest for the alleged delay in deposit of said the amount. Secondly, no notice was issued to the appellant for deposit of this interest amount. In the absence of any notice having been issued demanding this amount, for the reasons stated above, the amount could not have been appropriated. The appellant would be entitled to refund of ₹ 43,57,427 /- claimed in the application filed on 05.11.2008. The order for appropriation of ₹ 14,38,359/- towards interest, as confirmed by the Commissioner(Appeals) by order dated 16.08.2018, is also set aside - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Rejection of refund claim of ?43,57,427.
2. Appropriation of ?14,38,359 towards interest without issuance of a show cause notice.
3. Requirement of a show cause notice under section 11A of the Central Excise Act for appropriation of differential duty paid under protest.
4. Validity of the Commissioner (Appeals)' interpretation of section 11A of the Central Excise Act.
5. Entitlement to refund and consequential reliefs.

Detailed Analysis:

1. Rejection of Refund Claim of ?43,57,427:
The appellant, engaged in manufacturing and marketing medicaments, paid excise duty on physician samples using a valuation method under rule 11 read with rule 8 of the Central Excise Valuation Rules, 2000. This was based on a Board Circular dated 01.07.2002. However, a subsequent Circular dated 25.04.2005 mandated valuation under rule 4. The appellant paid the differential duty under protest and later filed for a refund of ?43,57,427, which was rejected by the Assistant Commissioner and upheld by the Commissioner (Appeals).

2. Appropriation of ?14,38,359 Towards Interest Without Issuance of a Show Cause Notice:
The Assistant Commissioner appropriated ?14,38,359 from the rebate claims as interest for late payment of the differential duty. The appellant contested this appropriation, arguing that no show cause notice was issued for the interest demand, making the appropriation invalid.

3. Requirement of a Show Cause Notice Under Section 11A of the Central Excise Act for Appropriation of Differential Duty Paid Under Protest:
The appellant argued that the appropriation of the differential duty required a show cause notice under section 11A of the Central Excise Act, which was not issued. The Tribunal agreed, stating that section 11A mandates a show cause notice for any short-paid duty, and the appellant had deposited the amount under protest without accepting the department's contention.

4. Validity of the Commissioner (Appeals)' Interpretation of Section 11A of the Central Excise Act:
The Commissioner (Appeals) held that section 11A did not require a show cause notice for appropriating the differential duty paid under protest. However, the Tribunal found this interpretation incorrect, emphasizing that the issuance of a show cause notice is a legal requirement for confirming any demand under section 11A.

5. Entitlement to Refund and Consequential Reliefs:
The Tribunal concluded that the appellant was entitled to the refund of ?43,57,427 as the appropriation without a show cause notice was invalid. Consequently, the order rejecting the refund claim was set aside, and the appellant was granted the refund along with consequential reliefs. Additionally, the appropriation of ?14,38,359 towards interest was also set aside due to the lack of a show cause notice.

Conclusion:
The appeal was allowed, setting aside the orders rejecting the refund claim and appropriating the interest amount. The appellant was entitled to the refund of ?43,57,427 and all consequential reliefs. The Tribunal emphasized the necessity of a show cause notice under section 11A for any appropriation of duty or interest.