2016 (3) TMI 896 - AT - Central Excise

Rebate claims entitlement - validity of demand raised - Held that - No demand under Rule 8 (3A) can be raised without service of valid show-cause notice, giving an opportunity of hearing for adjudication, the provision being penal in nature. Secondly, I hold that under the circumstances in this case being short payment of duty, the provisions of Rule 8(3A) are not attracted and the ld.Commissioner (Appeals) has erred in upholding the appropriation of the purported demand under Rule 8 (3A). Thirdly, I hold that no appropriation under Section 11 of the Act, can be done without giving an opportunity of hearing to the appellant. The appropriation is bad on this score also. Thus, all the appeals are allowed with consequential relief and the impugned orders are set aside. The appellant will be entitled to refund of rebate with interest starting from three months from the date of sanction till the date of disbursement. - Decided in favour of assessee

Summary

Issues:
Appeal against rebate claims sanction and appropriation under Section 8 (3A) of Central Excise Rules, 2002 without valid show-cause notice and opportunity of hearing.

Detailed Analysis:

Issue 1: Appropriation of Rebate Amount
The appellant, a manufacturer of electrical items, faced short payment of duty due to a computer software malfunction. They paid the short payment amount along with interest. The Range Superintendent directed the appellant to deposit an additional amount under Rule 8(3A) of CCR, 2002. The appellant contended that Rule 8(3A) did not apply as they had already rectified the short payment. The Revenue appropriated the rebate amount without granting an opportunity to the appellant.

Issue 2: Appeal and Dismissal
The appellant appealed to the Commissioner (Appeals) against the appropriation of rebate amount, but the appeal was dismissed. The appellant then approached the Tribunal challenging the dismissal of the appeal.

Issue 3: Arguments and Rulings
The appellant argued that Rule 8(3A) did not apply as there was no default in payment, and no show-cause notice was served. They contended that Section 11A(b) did not require a show-cause notice in cases of self-payment of duty with interest. The Revenue relied on a previous Tribunal ruling regarding delayed duty payment.

Issue 4: Tribunal Decision
The Tribunal held that Rule 8(3A) could not be invoked without a valid show-cause notice and opportunity for hearing, as it is penal in nature. The Tribunal also ruled that in cases of short payment rectified by the assessee, Rule 8(3A) did not apply. The Commissioner (Appeals) erred in upholding the appropriation without proper procedures. The Tribunal emphasized that appropriation under Section 11 required a hearing, making the current appropriation invalid.

Conclusion
The Tribunal allowed all appeals, setting aside the impugned orders. The appellant was granted a refund of the rebate amount with interest, starting from three months after the date of sanction till disbursement. The judgment highlighted the importance of following due process and providing opportunities for hearing before making appropriations or demands under penal provisions.