2024 (11) TMI 400 - HC - Central Excise

Legality of adjudication proceedings held by Respondent No. 2 - refund of excise duty u/s 11B of the Central Excise Act, 1944 - violation of principles of natural justice - HELD THAT - It is opined that the claim of the petitioner for the refund in terms of Section 11-B of the Central Excise Act, 1944 ought to have been decided before taking any action as is envisaged in the impugned show cause notice against the petitioner. It seems that the application of the petitioner for refund remained undecided and the Respondent No. 2 instead proceeded to recover the amount, which as per the Respondent No. 2 was illegally utilized/withdrawn by the petitioner by issuing a show cause notice dated 13.07.2018. Undoubtedly, the petitioner has been heard in the matter and he was given an opportunity to reply the same. The adjudicating authority has also passed a reasoned order but that does not meet the requirement of Section 11B as no such adjudication is apparent from the reading of the impugned order of adjudication. The amount which is subject matter of the show cause notice and the order of adjudicating authority impugned in this petition shall be reversed and kept in FDR with the Respondent No. 2-Additional Commissioner, Central GST Central Excise and appropriated as per the final orders to be passed by Respondent No. 1-Principal Commissioner, Central GST Central Excise Commissionerate, Jammu. The matter is sent back to the Respondent No. 1-Principal Commissioner, Central GST Central Excise Commissionerate, Jammu to consider and dispose the application for refund filed by the petitioner in accordance with law, provided that the application is complete in all respects or is completed by the petitioner within a period of four weeks from today. Petition disposed off by way of remand.

Summary

Issues:
Challenge to show cause notice and order in original regarding excise duty refund under Section 11B of the Central Excise Act, 1944.

Analysis:
The petitioner, a company engaged in manufacturing zinc oxide, challenged a show cause notice and an order in original issued by Respondent No. 2 regarding excise duty refund under Section 11B of the Central Excise Act, 1944. The petitioner claimed to have erroneously paid excise duty on raw materials, unaware of a Circular of 2016 exempting waste material from duty. The petitioner sought a refund under Section 11B but was served with a show cause notice instead. The High Court noted that the refund application should have been decided before initiating any action against the petitioner. Despite being heard and given an opportunity to reply, the adjudicating authority's order did not meet the requirements of Section 11B as no proper adjudication was evident. Therefore, the court quashed the show cause notice and the order in original.

The court directed the amount in question to be reversed and kept in a Fixed Deposit Receipt with the Additional Commissioner, Central GST & Central Excise, pending final orders by the Principal Commissioner. The matter was remanded to the Principal Commissioner to consider and dispose of the refund application in accordance with the law, provided it is complete within four weeks. If the refund application is decided against the petitioner, Respondent No. 2 is free to proceed against the petitioner as per the law. The case was disposed of along with any connected applications.

In conclusion, the High Court found that the petitioner's claim for a refund under Section 11B should have been decided before taking any action based on the show cause notice. As the adjudication did not meet the statutory requirements, the court quashed the notice and the order in original. The court provided specific directions regarding the amount in question and the further processing of the refund application, ensuring compliance with legal procedures and timelines.