KEDIA VANASPATHI LTD. Vs. COMMISSIONER OF CENTRAL

JUDGEMENT

(1.) THIS appeal arises from OIA No. 3/07 dated 30th March 07 by which the Commissioner (Appeals) has set aside the OIO No. 86/05 dated 30.12.05 and ordered for recovery of Rs. 4,91,581/ - which was granted as refund vide OIO No. 86/05. The OIO No. 86/05 had granted refund on the premise that the credit is available to the assessee. This was challenged by the revenue before the Commissioner (Appeals) and the Commissioner (Appeals) has set aside the OIO No. 86/05 and held that the assessee is not eligible for the credit and the amount is required to be recovered from them. The assessee had taken a stand that the recovery proceedings has to commence by issue of show cause notice in terms of Proviso to Section 11A of the Act. The revenue had not issued show cause notice. The proceedings started with the assessee filing an application for refund of the said amount on the receipt of the favourable decision from the Commissioner (Appeals).

(2.) IT is the assessee's contention that they had requested for transfer of money credit amounting to the above sum lying in balance at their Hyderabad unit to their Kothur unit and made an application to the Assistant Commissioner which was rejected vide Letter No. IV/16/50/2003 -T dated 22.8.03. Aggrieved by this, the assessee went in appeal to the Commissioner (Appeals) who decided the issue in their favor vide OIA No. 84/04 CE dated 28.4.04. The Department filed an appeal before the CESTAT against the OIA No. 84/04. The CESTAT remanded the case to Commissioner (Appeals) for denovo consideration by Final Order No. 1615/04 dated 18.10.04. The Commissioner (Appeals) again decided the case in assessee's favour vide CIA No. 1.36/05 (H -III) CE dated 30th June 2005 and allowed the transfer and utilization of money credit to Kothur Unit. In view of this favorable order the assessee once again credited the disputed money credit amount in their Part II account in the month of July 2005 and made a debit entry for the said amount. It is the assessee's submission that although a show cause notice was issued earlier with regard to the irregular availment of the credit, but later after the Commissioner (Appeals) allowed the case on remand from the CESTAT in their faovur, the refund was granted to them. The impugned OIO is an order of sanction of the amounts and the same paid vide cheque bearing No. G 543641 dated 30.12.05. The revenue appealed against this order after the refund was made before the Commissioner (Appeals). The appellants contention is that once refund has been made, the revenue ought to issue show cause notice afresh bringing out the reasons for recovery of the erroneous refunds. The refund was made as a consequence of their appeal being allowed by the Commissioner (appeals) vide OIA No. 136/05 dated 30.6.05. It is the contention of the appellant that the department aggrieved against the order of refund it had issued a show cause notice as to why the amount should not be credited to Consumer Welfare Fund. The OIO after due consideration noticed that the demand was not hit by principles of unjust enrichment and therefore, the Assistant Commissioner allowed the refund and made the payment through cheque along with OIO. Therefore, the revenue ought to have issued a fresh show cause notice for recovery of the amount. The non -issue of showcause notice is sufficient ground to set aside the impugned order -in -appeal.

(3.) THE learned Counsel refers to Board Circular No. 423/56/98 -CX dated 22.9.1998 wherein it is clarified that the Order Under Section 35E(2) does not automatically result in the recovery of the refund. This has to be followed by show cause notice Under Section 11A which should be issued within 6 months from the date of actual refund. He also refers to larger bench judgment rendered in the case of Best and Crompton Engg. Ltd., v. CCE Chennai wherein it has been held that erroneous refund is required to be recovered under Section 11A of CE Act 1944 and not through review proceedings under Section 35E. He refers to Bombay High Court judgments rendered in the case of Bajaj Auto Ltd., v. UOI wherein the same principle has been laid down. He further refers to Kolkata Bench judgment rendered in the case of Gillooram Gouri Shankar v. CCE Jamshedpur 2001 (137) ELT 330 (Tri -Kol) which has followed the judgment rendered in the case of UOI v. Jain Shudh Vanaspathi Ltd. which also lays down that demand for recovery of erroneous refund has to be only by issue of show cause notice under Section 11A of the Act.