2016 (12) TMI 1175 - AT - Central Excise

Demand - Refund - Notification No.32/99-CE dated 08.07.1999 - Interest - Penalty - Rule 173Q, Rule 230 of Central Excise Rules, 1944 - Held that - Hon ble Apex Court in its judgment R.C. Tobacco Pvt. Ltd. -vs.- Union of India 2005 (9) TMI 80 - SUPREME COURT OF INDIA upheld the constitutional validity of Sec.154 of the Finance Act 2003 and has also held that period of demand under Sec.11A of the Central Excise Act 1944 would not apply to the recovery of dues under Sec.154(4) of the Finance Act, 2003 - Appellant has argued that a quantified recovery letter/communication was required to be issued to them, under the provisions of Sec.154(4) of the Finance Act, 2003 specifying the demands/refund paid to them, alongwith specified amount of interest, so that appellant could pay the dues within 30 days from the assent of the President given to the Finance Bill, 2003 - Apex Court held that issuing of a demand show cause notice for the amount recoverable under the mandate of Section 154 of the Finance Act, 2003 will be an empty formality and stands covered by useless formality theory . The amount of duty in the case of Dharampal Satyapal vs. DCCE, Gauhati 2015 (5) TMI 500 - SUPREME COURT , decided by Apex Court, was also quantified and communicated to the appellant Dharmapal Satyapal Ltd. by a recovery order of June, 2003, as evident from Paras-6 and 39 of this case law As per the above provisions of Section 154(4) recovery shall be made of duty, interest or other charges within a period of 30 days from the day on which Finance Bill 2003 receives assent of President. The amounts recoverable will include interest payable under Sec.11AB of the Central Excise Act, 1944 even if not specifically mentioned in Section 154(4) of the Finance Act - Apex Court held that issuing of a demand show cause notice for the amount recoverable under the mandate of Section 154 of the Finance Act, 2003 will be an empty formality and stands covered by useless formality theory . The amount of duty in the case of Dharampal Satyapal vs. DCCE, Gauhati (supra), decided by Apex Court, was also quantified and communicated to the appellant Dharmapal Satyapal Ltd. by a recovery order of June, 2003, as evident from Paras-6 and 39 of this case law - Appeal allowed - decided in favor of the assessee.

Summary

Issues Involved:
1. Applicability of exemption and refund procedures under Notification No. 32/99-CE and subsequent amendments.
2. Validity of Show Cause Notices under Section 11A and 11AB of the Central Excise Act, 1944.
3. Requirement of a quantified recovery letter under Section 154(4) of the Finance Act, 2003.
4. Interest liability on duty and refunds under Section 154(4) of the Finance Act, 2003.
5. Adherence to principles of natural justice in adjudication.

Issue-wise Detailed Analysis:

1. Applicability of Exemption and Refund Procedures:
The appellant availed exemption/refund under Notification No. 32/99-CE dated 08.07.1999 for the period October 1999 to September 2000. The exemption was withdrawn by Notification No. 45/99-CE dated 31.12.1999 but restored by Notification No. 1/2000-CE dated 17.01.2000. The appellant's refunds were granted up to 15th June 2000, but subsequent claims were kept in abeyance. The factory ceased production in September 2000 due to non-payment of refunds, and the exemption was again withdrawn by Notification No. 1/2001-CE dated 22.01.2001.

2. Validity of Show Cause Notices:
Two Show Cause Notices dated 28.08.2001 and 10.09.2001 were issued for recovery of ?2,15,15,160/- and ?2,76,90,000/- along with interest under Section 11A and 11AB of the Central Excise Act, 1944. The Gauhati High Court initially ruled in favor of the appellant, but the Government of India retrospectively nullified the exemption via Section 154 of the Finance Act, 2003. The Supreme Court upheld the constitutional validity of Section 154, rendering the Show Cause Notices under Section 11A and 11AB invalid post the enactment of Section 154(4).

3. Requirement of a Quantified Recovery Letter:
The appellant argued that a quantified recovery letter was necessary under Section 154(4) of the Finance Act, 2003, specifying the amounts and interest payable. The Supreme Court's decision in R.C. Tobacco Pvt. Ltd. vs. UOI confirmed that recovery under Section 154(4) does not require the limitations of Section 11A. However, the Tribunal held that a recovery order specifying the amounts and interest was required to be communicated to the appellant, following the principles of natural justice.

4. Interest Liability on Duty and Refunds:
Interest on the duty payable under Section 11A starts from the date the duty is due until payment. The Tribunal observed that the exact rate of interest was not clear from the proceedings and needed to be quantified. The refunds sanctioned were not erroneous and thus not recoverable under Section 11A but under Section 154(4), which requires a specific recovery order.

5. Adherence to Principles of Natural Justice:
The Tribunal noted that the appellant was not given an opportunity for a personal hearing, violating principles of natural justice. The Tribunal emphasized that recovery proceedings under Section 154(4) presuppose a written communication from the department, giving quantified amounts and interest for recovery. The Tribunal set aside the Order-in-Original dated 31.10.2007, confirming the Show Cause Notices, and allowed the appeal to the extent that recovery orders must follow the due process.

Conclusion:
The Tribunal concluded that the recovery under Section 154(4) of the Finance Act, 2003, requires a quantified recovery order and adherence to principles of natural justice. The impugned Order-in-Original was set aside, and the appeal was allowed to the extent indicated, emphasizing the need for proper communication and fair representation in recovery proceedings.