2018 (7) TMI 538 - AT - Service Tax

100% EOU - recovery of Refund of unutilized CENVAT Credit - whether for recovery of refund already sanctioned, the SCN under Section 11A is necessary in each and every case? - Held that - The vital aspects that whether the refund was erroneous or otherwise was not examined by the Ld. Commissioner (Appeals), therefore, in order to the recovery of refund, this aspects has to be examined then only it can be decided that whether by order of Commissioner (Appeals) itself recovery can be made or the entire process of Section 11A such as issuance of SCN, adjudication is required - the matter on this aspect should be reconsidered by the Ld. Commissioner (Appeals) - appeal allowed by way of remand.

Summary

Issues involved: Refund claim time bar, recovery of erroneous refund without SCN, applicability of Section 11A for refund recovery.

Analysis:
1. The case involves a dispute over a refund claim of unutilized credit by an appellant who converted from a 100% EOU to a DTA Unit. The Assistant Commissioner initially sanctioned the refund, but the Ld. Commissioner (Appeals) overturned this decision citing it as time-barred, directing the appellant to pay back the refund with applicable interest.

2. The appellant argued that without issuing a Show Cause Notice (SCN) under Section 11A and undergoing adjudication, the recovery of the granted refund is without jurisdiction. The appellant relied on judgments like Dupen Laboratories Pvt. Ltd Vs. CCE & ST, Daman 2014 and CC (Preventive), Jamnagar Vs. Shree Steels & Rolling Indus 2006 to support their claim.

3. The Revenue, represented by the Ld. Assistant Commissioner, contended that as per a recent judgment of the Hon'ble Jurisdictional Gujarat High Court, only erroneous refunds require an SCN under Section 11A. Since the refund in this case was sanctioned by the Assistant Commissioner, it was not erroneous, making the SCN unnecessary. The Revenue cited the judgment of Gujarat State Fertilizers & Chemicals Ltd. Vs. CCE 2017 to support their argument.

4. The Member (Judicial) analyzed the arguments and referred to various High Court judgments, including the Gujarat High Court, to determine the necessity of an SCN under Section 11A for refund recovery. The Member noted that the Ld. Commissioner (Appeals) did not examine whether the refund was erroneous, a crucial aspect in deciding the recovery process. Therefore, the matter was remanded back to the Commissioner (Appeals) for reconsideration specifically on the recovery direction issue.

5. Ultimately, the appeal was allowed, and the case was remanded to the Commissioner (Appeals) solely on the limited issue of the recovery of the refund along with interest, emphasizing the need for a thorough examination of whether the refund was erroneous before recovery proceedings.