2022 (3) TMI 101 - AT - Central Excise

Tax Tribunal grants refund appeal, cites legal provisions, mandates Show Cause Notice for duty demand

M/s. Bird Audio Electronics Versus Commissioner of CGST

The Tribunal allowed the appeal, setting aside the rejection of the refund claim by the Department. It directed the refund of the disputed amount along ... und of amount deposited during Audit - CENVAT Credit - outward freight - whether appellant had rightly claimed the Cenvat credit of the service tax paid by him on the transportation charges, the sales by him being on FOR basis? - entitlement of interest - HELD THAT:- It is an admitted fact that the amount for which refund has been claimed by the appellant was got deposited by the Department at the time of conducting audit of appellants record. Hence it is an admitted fact that a SCN as required in law for demand of the duty found at the time of audit/ investigation, to not to have been paid has been issued to the appellant. Though the contention of Revenue in this regard is that since the necessary information required to be given in the SCN was made available to the appellants in the form of various letters and orders and that the appellant agreed to the objections raised by the audit party and thereafter voluntarily paid the observed short amount of duty. But to my opinion this contention of Department is not accedable because the issuance of SCN in a particular format is a mandatory requirement of law. The law requires the said SCNs to be issued under a specific provision of law and not as a correspondence or part of an order. Nor even the communication at the time of conducting audit of the assessees record. The sub-rule (1) of this rule mandates that such Cenvat Credit shall be recovered from the assessee in accordance of provisions of section 11A of the Excise Act or section 73 of the Finance Act. Sub-section (a) of section 11 (A) of the Act which is parimateria to section 73 of Finance Act requires the Central Excise Officer to serve a notice on the per chargeable with the duty which either has not been levied or paid or which has been short levied or short paid, that too, within a specific period from the relevant date. The use of word “shall” is sufficient to hold mandatory compliance of the said provision. CBEC Circular No.423/56/98-CX dated 22.09.1998 also stresses the need for concerned Departments to issue timely demands through SCN. The Hon’ble High Court of Madras in the case of THE COMMISSIONER OF CENTRAL EXCISE, COIMBATORE VERSUS M/S. PRICOL LTD., THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL [2015 (3) TMI 735 - MADRAS HIGH COURT] has held that the SCN , as provided under section 11A of CEA, is mandatory in nature and the same has to be adhered to before proceeding further in the matter. The Circular is binding on the Departmental authorities. Hence, the Hon’ble Court held that in absence of any such SCN, Department cannot seek recovery of the amount. The payment made by the appellant at the time of audit, in absence of any SCN for the same, cannot be held to be the payment against the demand raised by the Department without even going into the merits of the nature of demand - In light of the above discussed mandate of section 11A of CEA and the absence of the requisite SCN the amount got deposited at the instance of audit team is liable to be refunded to the appellant. Whenever an amount is to be refunded in terms of section 11AA, 11BB, 11DD and 11AB of the Excise Act, an interest at the rate which varies from 6% to 18% has to be granted. Appeal allowed - decided in favor of appellant. Issues:1. Availing Cenvat Credit on outward freight and missing invoice.2. Rejection of refund claim by the Department.3. Legal requirements for issuing Show Cause Notice (SCN) for duty demand.4. Dispute over the voluntary payment of duty liability.5. Interpretation of relevant provisions for refund and interest calculation.Analysis:1. The appellant availed Cenvat Credit on outward freight and a missing invoice, which were objected to during an audit. The appellant deposited the disputed amount voluntarily, including credit, interest, and penalty. A refund claim was filed but rejected by the Department based on the audit report.2. The Department rejected the refund claim, stating that since the appellant voluntarily paid the disputed amount after the audit team's observation, no refund was warranted. The rejection was confirmed in subsequent orders, leading to the appellant appealing to the Tribunal.3. The Tribunal analyzed the legal requirement for issuing a Show Cause Notice (SCN) for demanding duty. It emphasized that the issuance of a specific SCN under Rule 14 of Central Excise Rules is mandatory, as per Section 11A of the Excise Act. The Tribunal cited relevant case law and circulars to support the mandatory nature of the SCN for recovery of duty.4. The dispute over the voluntary payment of duty liability was addressed, with the Department arguing that the payment was not made under protest but voluntarily. However, the Tribunal held that without a proper SCN, the payment could not be considered against a demand raised by the Department.5. In light of the legal requirements and precedents, the Tribunal set aside the order rejecting the refund claim. It directed the refund of the disputed amount along with interest at a rate of 12%, citing previous tribunal decisions for reference. The appeal was allowed, and consequential relief was ordered to follow.This detailed analysis of the judgment highlights the key issues, legal interpretations, arguments presented by both parties, and the final decision of the Tribunal, providing a comprehensive overview of the case.