2024 (6) TMI 42 - AT - Service Tax

Refund of service tax paid during investigation - Denial of CENVAT Credit - no proper SCN issued - violation of principles of natural justice - HELD THAT - It is an admitted fact that Appellant was submitting returns from time to time and when an objection was made by Central Excise audit party, Appellant paid the amount. Thereafter when there was no further proceedings initiated by the respondent to appropriate the amount paid by the appellant, refund application was submitted for refund of said amount. Only based on the refund application, SCN was issued by Deputy Commissioner of Central Excise without specifying the provision under which is issued. However from the wording of the above said SCN, it is evident that on scrutiny of the documents along with refund claim, they have issued the said SCN. As per the judgment of Hon ble Apex court in the matter of M/s Metal Foreign 2002 (11) TMI 90 - SUPREME COURT , issue of SCN is mandatory requirement for raising demand. In the absence of any SCN or order appropriating the amount paid by the Appellant during investigation, Adjudicating authority have no reason to reject the claim for refund made by the Appellant. The impugned order is set aside - appeal allowed.

Summary

Issues:
1. Central Excise duty and CENVAT credit payment dispute
2. Validity of show cause notice for demand
3. Refund application rejection and appeal
4. Denial of CENVAT credit and refund claims

Detailed Analysis:
1. The Appellant, a manufacturer of parts under Chapter 84 and 85 of the Central Excise Tariff Act, faced a dispute regarding non-payment of Central Excise duty/CENVAT credit totaling Rs. 5,79,987. The objection raised during an audit led to the payment by the Appellant, followed by a refund application upon realizing non-liability. However, the Adjudicating authority denied the refund, leading to the appeal. The Appellant argued that the demand lacked supporting evidence and no proper authority had approved the payment, emphasizing the necessity of a show cause notice for demand as per legal precedents.

2. Legal precedents, including judgments by the Hon'ble Supreme Court and appellate tribunals, were cited to support the Appellant's contention regarding the mandatory requirement of a show cause notice for raising demands. The judgments emphasized that mere communications or orders cannot substitute a formal show cause notice, and specific legal provisions must be adhered to, including indicating the demanded amount and serving the notice within the prescribed period. The lack of a formal show cause notice or order appropriating the amount paid during investigation was highlighted as a reason to challenge the denial of the refund claim.

3. The Appellant further contested the rejection of specific claims, such as Rs. 1,31,372 for agricultural equipment parts, Rs. 11,991 for CENVAT credit, and other credit denials related to security services. Legal arguments were presented, citing relevant case laws and judgments to support the Appellant's position that the denials were unjustified and lacked legal merit. The Appellant also raised jurisdictional issues concerning the denial of certain claims, emphasizing the need for proper legal grounds and adherence to established legal principles in such matters.

4. The Tribunal, after considering the submissions and legal arguments from both sides, allowed the appeal in favor of the Appellant. The decision was based on the lack of a formal show cause notice or order appropriating the amount paid, as mandated by legal requirements. The Tribunal also considered the Appellant's arguments on the merit of specific claims and found in favor of the Appellant, granting relief accordingly. The judgment highlighted the importance of procedural compliance and legal validity in matters of duty payments, refunds, and credit denials, emphasizing the need for adherence to legal provisions and precedents in such disputes.