2009 (1) TMI 384 - AT - Central Excise

Whether SCN required for recovery of interest on erroneously granted rebate Assessee voluntarily paid back erroneously granted rebate - A combined reading of Section 11A(2B) and Section 11AB(1) makes it abundantly clear that even when the assessee voluntarily pays the erroneous sanctioned refund he is liable to pay interest in terms of Explanation 2 to Section 11A(2B).. - The details show that the erroneously sanctioned rebate was with the assessee for a period ranging from 326 days to 427 days. The argument of the assessee that they are not liable for interest for the reason that no show cause notice was issued does not stand to reason in the light of the legal provisions. In other words the assessee is duty bound to pay the interest without waiting for any show cause notice. - Hence we dismiss the appeal

Summary

Issues Involved:
1. Liability to pay interest on erroneously sanctioned rebate.
2. Requirement of show cause notice for recovery of interest.
3. Authority of Assistant Commissioner to review his own orders.

Issue-Wise Detailed Analysis:

1. Liability to Pay Interest on Erroneously Sanctioned Rebate:
The appellants exported IOPOMIDOL (Tech) and claimed a rebate of Rs. 1,48,23,424/-. Later, it was discovered that the product was exempted from duty, making the rebate erroneous. The appellants voluntarily repaid the rebate amount but disputed the interest of Rs. 21,62,336/- demanded by the Assistant Commissioner. The tribunal clarified that rebate is equivalent to a refund. If a refund is erroneously sanctioned, it falls under Section 11A of the Central Excise Act, which mandates recovery. Section 11A (2B) allows for voluntary repayment of such erroneous refunds without the need for a show cause notice. However, Explanation 2 to Section 11A(2B) and Section 11AB(1) explicitly state that interest is payable on such amounts. The tribunal emphasized that the appellants were liable to pay interest from the date of the erroneous rebate sanction to the date of repayment, regardless of the absence of a show cause notice.

2. Requirement of Show Cause Notice for Recovery of Interest:
The appellants argued that no interest is payable as no show cause notice was issued under Section 11A of the Central Excise Act. However, the tribunal noted that Section 11A(2B) allows for voluntary repayment of erroneous refunds without the need for a show cause notice. The tribunal highlighted that the legal provisions introduced in 2001 mandate the payment of interest even when the erroneous rebate is repaid voluntarily. Therefore, the argument that no interest is payable due to the absence of a show cause notice was rejected.

3. Authority of Assistant Commissioner to Review His Own Orders:
The appellants contended that the Assistant Commissioner could not review his own orders and recover interest without challenging the order before the Appellate Authority. The tribunal dismissed this argument, stating that the Assistant Commissioner's action was legally correct under Section 11 of the Central Excise Act, which allows for the adjustment of sums due to the government from any money owed to the person. The tribunal upheld the lower authority's action of adjusting the interest amount from the rebate due to the appellants in another case.

Conclusion:
The tribunal held that the appellants are liable to pay interest under Section 11AB on the erroneously sanctioned rebate. The action of the lower authority in adjusting the interest from the amount due to the appellant was deemed legally correct under Section 11 of the Central Excise Act. The appeal was dismissed, and the impugned order was upheld.