2018 (1) TMI 421 - AT - Central Excise

Refund of amount under protest - time limitation - CBEC Circular dated 22.9.1998 - Held that - The period of dispute in the impugned appeal is 2003-04 and as such, the department officers were fully aware of the above Board circular which are also binding on them. Nonetheless, no show cause notice has been issued in the present case proposing recovery of the alleged erroneously refunded amount - The second proviso to section 35A of the Act requires, inter alia, that where Commissioner (Appeals) is of the opinion that any amount has been erroneously refunded, appellant should be given notice within the time limit specified in Section 11A of the Central Excise Act. The order passed by the Commissioner (Appeals) cannot sustain and will therefore have to be set aside - appeal allowed.

Issues:
1. Refund claim procedure and requirements under Section 35A(3) of the Act.
2. Demand for recovery of erroneous refund under Section 11A of the Central Excise Act, 1944.
3. Alleged suppression of production, clearance, and duty evasion.
4. Availability of CENVAT credit and intention for duty evasion.
5. Legal infirmity in the procedure followed by the department.

Analysis:
1. The appellant filed a refund claim for duty paid under protest, which was sanctioned by the original authority. However, the Commissioner (Appeals) set aside the order and confirmed the demand for duty along with interest and penalty. The appellant argued that no show cause notice was issued by the Commissioner (Appeals) as required under Section 35A(3) of the Act, which provides for a reasonable opportunity to show cause against the proposed order and a show cause notice within the prescribed time limit. The absence of such notice was a crucial procedural flaw raised by the appellant.

2. The appellant contended that the demand for recovery of an erroneous refund should have been made under Section 11A of the Central Excise Act, 1944, within the prescribed limitation period. The appellant cited Circular No. 423/56/98-CX and relevant case laws to support this argument. The appellant highlighted that the department failed to issue a show cause notice proposing the recovery of the allegedly erroneously refunded amount, as mandated by law.

3. The appellant challenged the allegation of suppression of production and clearance, arguing that the consumption norm adopted by the Revenue was arbitrary and lacked legal backing. The appellant emphasized that CENVAT credit on inputs and capital goods was available, indicating no intention for duty evasion. The appellant further contended that the demand was hit by limitation, questioning the validity of the department's claims regarding duty evasion.

4. The department supported the impugned order, arguing that there was no legal infirmity in the procedure followed. The department filed appeals against the original authority's orders and the grant of refund by the second adjudicating authority. The department maintained that there was no necessity to issue another show cause notice for the recovery of an erroneous refund, as the appeals were in line with the legal requirements.

5. After hearing both parties and reviewing the records, the Tribunal found that the Commissioner (Appeals) failed to follow the proper procedure in issuing show cause notices and demanding recovery of an erroneous refund under Section 11A. The Tribunal referred to relevant circulars and legal opinions to emphasize the necessity of timely demands under Section 11A. Consequently, the Tribunal set aside the Commissioner (Appeals) order and allowed the appeal with consequential relief as per law, highlighting the importance of adherence to procedural requirements in such cases.

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