Voluntary payment after audit objections can close proceedings without show cause notice when liability is accepted and refund is not maintainable.

Voluntary payment of duty, service tax, interest and penalty after acceptance of audit objections was treated as a valid closure of proceedings without a show cause notice, because the assessee had agreed with the audit findings and the department had prepared the calculation with its assistance. The record showed no coercion or mistake of law, and the payments were made by invoking the settlement-style provisions that permit conclusion of proceedings on acceptance of liability with interest and reduced penalty. On that basis, the refund claim was held not maintainable and rejection of refund was upheld.

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Issues: Whether the appellants were entitled to refund of the duty, service tax, interest and penalty voluntarily deposited after acceptance of audit objections, on the ground that no show cause notice or audit note was served.

Analysis: The payment was made after the appellants agreed with the audit objections and by invoking the benefit of Sections 11A(5), 11A(6) and 11A(7) of the Central Excise Act, 1944 and Section 73(4A) of the Finance Act, 1994. The record showed that the department had prepared the calculation with the appellants' assistance, APR was issued covering the proceedings, and there was no evidence of coercion or mistake of law. Those provisions contemplate closure of proceedings without a show cause notice where the assessee accepts the liability and makes payment with interest and applicable reduced penalty.

Conclusion: The refund claim was not maintainable and the rejection of refund was upheld against the assessee.

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