Audit-objection payment was not final settlement, so refund claim remained maintainable without a separate challenge to assessment.

Payment made by an assessee on the basis of an audit objection was not treated as a final settlement under the Central Excise Act where the record showed that the audit itself contemplated a show cause notice and there was no material that the assessee had elected closure under Section 11A(2). On those facts, the amount could not be regarded as a final payment or as an assessment that had to be separately challenged before seeking refund. The rejection of refund on the ground that the assessee should have appealed against the assessment was therefore unsustainable, and the refund claim was held maintainable.

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Issues: Whether the amount paid by the assessee pursuant to an audit objection attained finality under Section 11A(2) of the Central Excise Act, 1944, so as to bar refund without first challenging the assessment.

Analysis: The payment was made only on the audit objection and was not ed as a final settlement by the assessee. The record showed that the departmental audit itself contemplated issuance of a show cause notice, and there was no material showing that the assessee had opted for closure of the matter under Section 11A(2) of the Central Excise Act, 1944. On these facts, the payment could not be treated as a final payment or as an assessment that had to be separately challenged before claiming refund. The earlier authorities were therefore not justified in rejecting the refund on the ground that the assessee ought to have appealed against the assessment.

Conclusion: The refund claim was maintainable and the rejection of refund was unsustainable; the assessee succeeded.

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