07.03.2022- Amount Deposited During Department Audit Is Liable To Be Refunded If No Show Cause Notice Is Issued By The Department For Such Amount

The Hon’ble CESTAT, Delhi vide its order dated 28.02.2022 in the matter of M/s Bird Audio Electronics Vs Commissioner of CGST in Excise Appeal No. – 51056 of 2021 held that the amount which was deposited at the instance of department audit team for alleged wrongly availed CENVAT Credit is liable to be refunded in absence of any show cause notice for the same.

The Appellant filed the appeal assailing the order- in-appeal no. 02/2021 dated 13.05.2021 where the refund claim of Rs. 4,72,084/- filed by the appellant was rejected by the department.

 

Facts:

  • The Appellant is engaged in manufacturing and selling of speakers and deliver the same to its customers on receiving purchase orders from them.
  • An audit of the appellant was conducted by the department and it was observed that the appellant has wrongly availed CENVAT Credit for the tax paid on outward freight and one invoice no. 175 dated 12.09.2015 is missing.
  • The appellant as pointed by the audit team deposited an amount of Rs. 4,72,084/- on 09.07.2018 for the period 2013-14 to 2017-18, however later on filed a refund claim for the same amount on 13.06.2019.
  • The department in respect of the aforesaid refund filed issued a show cause notice dated 27.07.2020 proposing to reject the refund claim alleging that the appellant agreed to the objections of the audit team deposited the said amount of RS. 4,72,084/-.
  • Thereafter the refund claim of the appellant was rejected vide order no. 21 dated 11.11.2020, the appellant preferred an appeal against the aforesaid order which was rejected vide order-in-appeal no. 02/2021 dated 13.05.2021. Hence the present appeal.

Appellants Plea:

  • The appellant relying on Commissioner of Customs & Central Excise, Aurangabad vs. Roofit Industries Ltd. Reported as 2015 (319) ELT 221 (S.C.) submitted that it has rightly availed the CENVAT Credit in respect of transportation Charges on FOR basis and the missing invoice as alleged by the department was later on found.
  • The appellant further relying on M/s. Digipro Import and Export Pvt. Ltd. vs. Union of India reported as 2017 (350) ELT 145 (Del.) submitted that it is entitled to avail the CENVAT Credit and the rejection of refund claim is illegal and against the procedure of law. Hence prayed for setting aside the impugned order and sanction the refund with the applicable interest.

On the other hand, Department Representative referring to the para 10 of the order submitted that the amount in dispute, for which the refund has been claimed, was deposited voluntarily by the appellant after agreeing to the objections of the audit team and was not under protest.

Held:

  • The Hon’ble CESTAT after considering the submissions observed that it is an admitted fact the amount for which refund has been claimed was made to be deposited during audit, hence a SCN as required under law had to be issued to the appellant by the department.
  • The contention of the department, that the information required to be given in the SCN was already available with the appellant in form of various letters and orders, cannot be acceded as the issuance of SCN is a mandatory under law.
  • Further referring to the Section 11A of the Excise Act, rule 14 of the Central Excise rules & Section 73 of the Finance Act, it was noticed that the SCN needs to be issued under a specific provision of law not as a correspondence or part of an order.
  • The Hon’ble Bench observing that Section 11A of the Excise Act is parimateria to Section 73 of the Finance Act and in both the sections, the use of word ‘shall’ in respect of issuance of SCN, is sufficient to hold mandatory compliance of the said provision.
  • Lastly, referring to the CBEC Circular 423/56/98-CX dated 22.09.2018 and the Hon’ble Madras High Court decision in Commissioner of Central Excise, Coimbatore vs. Pricol Ltd. reported as 2015 (320) ELT 703 (Mad.) & on Hon’ble Delhi High Court decision in Digipro Import & Export, held that in view of settled position in law the amount deposited at the time of audit cannot be said to be the payment against the demand raised by the department and the amount deposited at the instance of audit team is liable to be refunded in absence of SCN under Section 11A.

The Hon’ble CESTAT, Delhi with above findings set aside the impugned order and allowed the appeal filed by the Appellant with the directions to refund the amount in dispute along with interest at the rate of 12%.

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