2023 (12) TMI 301 - AT - Central Excise

Seeking refund of differential duty demanded without issuing show cause notice and without affording an opportunity of hearing to the appellant - violation of principles of natural justice - HELD THAT - The Hon ble Supreme Court has consistently held in various decisions that show cause notice is a condition to demand any tax in this regard. Reference made to the decision of the Hon ble Apex Court in the case of GOKAK PATEL VOLKART LIMITED VERSUS COLLECTOR OF CENTRAL EXCISE 1987 (2) TMI 64 - SUPREME COURT wherein in para 9 and 10 the Hon ble Apex Court has observed An opportunity to be heard is intended to be afforded to the person who is likely to be prejudiced when the order is made before making the order thereof. Notice Is thus a condition precedent to a demand under sub-section (2). In the instant case, compliance with this statutory requirement has not been made, and, therefore, the demand is in contravention of the statutory provision. The ratio of the decision cited is squarely applicable in the present case because in the present case also, no show cause notice as required in law was issued to the appellant and no opportunity of hearing as required under law was accorded. Hence, by following the ratio of the Hon ble Apex Court decision, the rejection of refund claim of Rs. 19,55,010/- deposited by the appellant under protest is liable to be refunded to the appellant as prescribed by the law - appeal allowed.

Summary

Issues Involved:
1. Demand of differential duty without issuing a show cause notice.
2. Rejection of refund claim of Rs. 19,55,010/- paid under protest.
3. Demand of interest on the differential duty.

Summary:

1. Demand of Differential Duty Without Issuing a Show Cause Notice:
The appellant, engaged in the manufacture of P or P Medicines, faced a classification dispute over Euphorbia Prostrata dry extract. The Assistant Commissioner initially confirmed a demand of Rs. 2,71,108/- for short payment of differential duty, which the appellant contested. During the pendency of the appeal, the Superintendent, Derabassi, demanded an additional Rs. 19,55,010/- for the period April 2012 to May 2013 without issuing a show cause notice. The Tribunal found this demand to be in violation of statutory provisions and principles of natural justice, as established by the Hon'ble Supreme Court in cases like Gokak Patel Volkart Ltd. Vs. Collector of Central Excise and CCE Vs. Akay Cosmetics. The Tribunal emphasized that a show cause notice is a condition precedent to any tax demand.

2. Rejection of Refund Claim of Rs. 19,55,010/- Paid Under Protest:
The appellant paid the demanded amount under protest and later sought a refund, arguing that no show cause notice was issued. The Assistant Commissioner rejected the refund claim, stating that no order established the amount as non-payable. The Commissioner (Appeals) upheld this rejection. The Tribunal, however, ruled that the rejection was incorrect, citing the Supreme Court's stance that tax collected without authority cannot be retained. The Tribunal directed the Revenue to refund the amount with interest, recognizing that the demand was made without following due legal process.

3. Demand of Interest on the Differential Duty:
The department also demanded interest on the differential duty amounting to Rs. 4,08,844/-. The Commissioner (Appeals) dropped this demand on the grounds of time bar. The Tribunal upheld this decision, reinforcing the necessity of issuing a show cause notice and following proper legal procedures before making any such demands.

Conclusion:
The Tribunal allowed the appeal, directing the Revenue to refund the amount of Rs. 19,55,010/- along with interest, as the demand was made without issuing a show cause notice and in violation of natural justice principles. The appeal was pronounced in the open court on 06.12.2023.