Statutory show cause notice required for Cenvat credit recovery; audit deposit without notice was refundable with interest.

Recovery of allegedly wrong Cenvat credit or duty was impermissible without a proper statutory show cause notice under the recovery provisions. As Rule 14 of the Central Excise Rules requires recovery to proceed in accordance with Section 11A, the notice was a condition precedent and payment taken during audit could not be treated as valid recovery. The amount deposited without such notice was therefore refundable, and interest was also admissible on the refunded sum. The refund claim was allowed with consequential relief.

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Issues: Whether the amount deposited during audit, in the absence of a show cause notice under the statutory recovery provisions, was liable to be refunded with interest.

Analysis: The amount claimed as refund had been deposited at the time of audit, but no show cause notice in the prescribed statutory form had been issued demanding recovery. Rule 14 of the Central Excise Rules requires recovery of wrongly taken Cenvat credit in accordance with Section 11A of the Central Excise Act, 1944, and the use of mandatory language makes issuance of a proper notice a condition precedent. The requirement is reinforced by Circular No. 423/56/98-CX dated 22.09.1998 and by judicial authority holding that recovery without a prior show cause notice is impermissible. On that basis, the payment made during audit could not be treated as a valid recovery of duty demand, and refund followed. Interest was also held admissible on the refunded amount.

Conclusion: The refund claim was allowed, along with interest at 12%, in favour of the assessee.

Final Conclusion: The impugned order was set aside and the refund was directed to be granted with interest and consequential relief.

Ratio Decidendi: Recovery of allegedly wrong Cenvat credit or duty cannot be sustained without a proper statutory show cause notice, and any amount collected during audit without such notice is refundable with interest.

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