2018 (2) TMI 893 - AT - Central Excise

Refund claim - denial on the premise that as appellant has paid the differential duty without any protest therefore refund cannot be granted - whether Section 11A(2B) had been applied or not? - Held that - as per Section 11A(2B), the show-cause notice is not required to be issued if the assessee pays duty along with interest - Admittedly, in this case appellant did not pay interest. Therefore, the appellant did not comply with the provisions of Section 11A(2B) of the Act. In this case, appellant has not complied with the provisions of Section 11A(2B) of the Act and therefore show-cause notice was required to be issued for the appropriation of the amount already paid by the appellant as duty - As no SCN has been issued, therefore, the Revenue cannot retain the said amount as duty with them without any adjudication. The refund claim filed by the appellant cannot be rejected - appeal allowed - decided in favor of appellant.

Summary

Issues:
Refund claim rejection based on differential duty payment without protest.

Analysis:
The appellant contested the rejection of their refund claim, which was based on the payment of differential duty without protest. An investigation revealed undervaluation of inputs by the supplier, leading to undervaluation of finished goods by the appellant. The appellant reversed the amount in their cenvat credit account but refused to pay interest and penalty, citing no collusion with the supplier. Subsequently, a demand for differential duty was made for a broader period, which the appellant contested, seeking a refund. The authorities rejected the refund claim, asserting that the appellant had paid duty based on their calculation, rendering them ineligible for a refund.

The appellant argued that duty payment can occur at clearance, through Section 11A show-cause notice issuance, or under Section 11A(2B) where the assessee pays differential duty with interest. As no show-cause notice was issued and interest was not paid, the appellant claimed entitlement to a refund. Citing legal precedents, the appellant contended that failure to comply with Section 11A(2B) conditions precludes duty appropriation without a show-cause notice, supporting their refund claim.

Contrarily, the respondent argued that the appellant voluntarily reversed the differential duty without protest, triggering Section 11B provisions. As the refund claim was not filed within a year of duty payment and not under protest, the respondent deemed the appellant ineligible for a refund. The respondent highlighted the appellant's admission of duty reversal as a basis for rejecting the refund claim.

The Tribunal analyzed Section 11A(2B) requirements, emphasizing that duty payment without interest does not exempt the appellant from a show-cause notice. Citing a previous case, the Tribunal ruled that amounts not adjudged as duty should be treated as revenue deposits, barring refund provisions. Referring to a Rajasthan High Court case, the Tribunal reiterated the importance of protest in contesting duty payments. Consequently, the Tribunal concluded that the appellant's non-compliance with Section 11A(2B) necessitated a show-cause notice for duty appropriation, rendering the refund claim valid. The impugned order was set aside, allowing the appeal with consequential relief.