2008 (1) TMI 148 - AT - Central Excise

Recovery of erroneous refund - correct procedure should have been adopted by revenue - recovery proceedings has to commence by issue of show cause notice in terms of Proviso to Section 11 A SCN not issued for the same - The lapse is very clear on the part of the Commissioner - impugned order is not correct in law and the same is set aside by allowing the appeal of assessee

Summary

Issues involved:
1. Recovery of erroneously refunded amount without issuing a show cause notice under Section 11A of the Act.
2. Validity of the order-in-appeal by Commissioner (Appeals) regarding the recovery of the refunded amount.
3. Compliance with legal procedures for recovery of erroneous refunds.
4. Jurisdiction of Commissioner (Appeals) to reopen settled issues.
5. Lack of challenge by revenue against specific orders before the Tribunal.

Analysis:

1. The appeal arose from an order by the Commissioner (Appeals) setting aside the earlier order granting a refund and ordering recovery without issuing a show cause notice. The appellant argued that recovery proceedings should start with a show cause notice under the Proviso to Section 11 A of the Act. The Tribunal noted that the refund was granted based on a favorable decision by the Commissioner (Appeals) without a fresh show cause notice for recovery, which was a procedural lapse.

2. The appellant had initially requested the transfer of money credit between units, which was allowed by the Commissioner (Appeals) in their favor. Subsequently, the revenue challenged the refund on grounds of unjust enrichment, but the Assistant Commissioner upheld the refund without issuing a fresh show cause notice for recovery under Section 11A. The Tribunal found that the revenue failed to follow the correct procedure for recovery of erroneous refunds, as mandated by legal provisions and relevant circulars and judgments.

3. The Tribunal referred to legal precedents emphasizing the necessity of issuing a show cause notice under Section 11A for recovery of erroneous refunds. It highlighted that the revenue's failure to issue a fresh show cause notice after the refund was granted based on a favorable decision was a critical procedural flaw, rendering the subsequent order for recovery invalid.

4. The Commissioner (Appeals) was found to have exceeded jurisdiction by reopening settled issues and going into the merits of the case, which was not the subject of the appeal. The Tribunal emphasized that the revenue should have challenged only specific aspects related to unjust enrichment, and the Commissioner (Appeals) should have limited the scope of the case accordingly.

5. The Tribunal noted that the revenue had not challenged specific orders before the Tribunal, indicating a lack of awareness of its own proceedings and legal procedures. The failure to challenge relevant orders and the incorrect procedure followed for recovery of the refunded amount led to the setting aside of the impugned order-in-appeal.

In conclusion, the Tribunal set aside the order-in-appeal, emphasizing the importance of following proper legal procedures, including issuing show cause notices under Section 11A for recovery of erroneous refunds, and restricting the scope of appeals to relevant issues without exceeding jurisdiction.