Credit of pre-deposit without refund claim upheld, and recovery rejected for want of notice and hearing.

Credit of a pre-deposited amount against a demand later set aside was permissible once the assessee informed the department, and a formal refund claim was not required for such adjustment. Recovery of that amount could not be ordered without issuing a show cause notice and giving an opportunity of hearing, as that would breach natural justice. The credit was therefore admissible and the recovery demand was unsustainable.

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Issues: Whether the assessee could take credit of the amount earlier deposited and utilize it without filing a formal refund claim, and whether recovery of that amount could be ordered without issuing a show cause notice and affording an opportunity of hearing.

Analysis: The credit taken by the assessee was held to be permissible in law. The amount had been deposited against a demand that was subsequently set aside and the assessee was entitled to take and utilize the credit after informing the department. A formal refund application was not necessary for such adjustment. Recovery of the amount could not be directed without notice and hearing, as that would offend the requirements of natural justice.

Conclusion: The credit was admissible, no refund claim was required, and the recovery demand was unsustainable. The issue was decided in favour of the assessee.

Ratio Decidendi: An assessee may take credit of a pre-deposited amount and utilize it after informing the department, without filing a formal refund claim, and recovery of such amount cannot be ordered without notice and opportunity of hearing.

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