Jurisdictional demand for credit reversal fails where statutory show cause notice and hearing are not issued.

Demand of wrongly availed credit under Rule 56A(5) of the Central Excise Rules had to be initiated by the competent authority through a show cause notice and after granting a hearing. A direct demand letter issued by the Superintendent without following that statutory procedure was beyond jurisdiction and void ab initio, so it was unenforceable. Because the underlying demand was void, the Assistant Collector's consequential adjustment of the alleged recovery against the refund could not independently survive and was not sustainable. The impugned recovery action therefore failed for non-compliance with the prescribed procedure and lack of authority.

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Issues: (i) whether the Superintendent could demand reversal of credit without issuing a show cause notice and without giving hearing; (ii) whether the Assistant Collector could adjust the alleged recovery against the refund amount.

Issue (i): whether the Superintendent could demand reversal of credit without issuing a show cause notice and without giving hearing.

Analysis: Demand of credit, even if wrongly availed, had to be raised under Rule 56A(5) of the Central Excise Rules by the Assistant Collector. The statutory procedure required issuance of a show cause notice and grant of hearing before confirming any demand. The Superintendent's direct letter demanding payment, without following that procedure, was beyond his authority and contrary to the legal requirement.

Conclusion: The demand raised by the Superintendent was jurisdiction and void ab initio, and therefore unenforceable.

Issue (ii): whether the Assistant Collector could adjust the alleged recovery against the refund amount.

Analysis: Once the Superintendent's demand itself was void ab initio, the consequential memorandum by which the Assistant Collector adjusted the alleged recovery against the refund could not stand independently.

Conclusion: The adjustment of the alleged recovery against refund was not sustainable.

Final Conclusion: The appeal succeeded because the impugned recovery action failed for want of jurisdiction and non-compliance with the prescribed procedure, leaving the assessee entitled to relief.

Ratio Decidendi: A demand of credit under Rule 56A(5) of the Central Excise Rules must be initiated by the competent authority by show cause notice and hearing, and any demand raised without statutory authority is void ab initio; a consequential adjustment based on such a void demand cannot survive.

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