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Judgment
Revenue is in appeal against the impugned order wherein the refund claim has been sanctioned by the Commissioner (Appeals).
The brief facts of the case are that the respondents manufacture Electronic Power steering. Their records for the period October 2008 to April 2012 were audited and it was pointed out that they cleared the goods at a price below their cost of production. Accordingly, they were asked to pay the differential duty which they paid in part through their RG 23A Part II (CENVAT account) and partly in cash. They also filed a letter of protest dated 25.11.2013. No show cause notice under Section 11A was issued to the respondent demanding the differential duty and to appropriate the duty already debited. Thereafter, the respondent filed a refund claim of the amount reversed under protest. A show cause notice dated 8.7.2015 was issued to the respondent asking them to explain as to why the refund claim should not be rejected as the amount was paid by them voluntarily. After due process, the adjudicating authority rejected the refund claim. On appeal, the Commissioner (Appeals) has allowed the refund claim to the respondent. Against this order, the Revenue is before us.
Ld.AR appeared on behalf of the Revenue and submits that a letter of protest submitted by the respondent is an afterthought. Further, the respondent has filed ER-1 with the department for the month of October, 2013 and November, 2013 by debiting amount in question but no protest was made. He also relied on the decision of Hon'ble Supreme Court in the case of Priya Blue Industries-2004 (172) ELT 145 (SC) and ITC vs. CCE, Kolkata-2019 (368) ELT 216 (SC) to say that no refund can be sanctioned even in cases of self assessment itself is not appealed or challenged.
On the other hand, Ld. Counsel for the respondent submits that as no show cause notice was issued to the respondent, the question of assessment does not arise. Moreover, the amount already reversed under protest is a 'deposit' only unless and until the same is appropriated and moreover, the respondent has reversed the same in their statutory records under protest. As soon as, the audit report was received, the respondent intimated that the amount has been reversed by the respondent is 'under protest'.
Heard and perused the records.
On a careful consideration of the submissions made by both sides, we find that it is admitted fact that although audit team raised objection and the respondent reversed the amount along with interest and protest letter was sent by the respondent to the Department but no show cause notice was issued to the respondent for appropriation of amount reversed by the respondent.
As the above facts are not in dispute, the amount reversed by the respondent can only be treated as a 'deposit' and as no assessment order has been passed, therefore, the decision of Hon'ble Supreme Court in the case of Priya Blue Industries (supra) and ITC (supra) are not applicable to the facts of this case. These judgments held that the process of refund is only a mechanical process based on an assessment already made and the officer sanctioning refund cannot revise the assessment already made. He can sanction refund only if it flows from the assessment. Therefore, only when an assessment (including self assessment) is made and consequently an amount is paid, refund cannot be sanctioned unless the assessment is appealed against and modified in appeal. However, in a converse situation, if duty is short levied or short paid, there is a provision under Section 11A of the Central Excise Act (or corresponding sections in Customs Act and Finance Act, 1994), a Show Cause Notice can be issued demanding the differential duty. In other words, there is a proper quasi-judicial process through which such short paid duty can be recovered. Unlike in refunds, the procedure for recovering short paid duty, does not require the original assessment to be challenged before the Appellate Authority. Therefore, if there is a short payment of duty, the only option for the Revenue is to follow the procedure prescribed under section 11A to recover such short paid duty. Even if the assessee pays the duty when pointed out by the Audit Party or Preventive team, such a payment of duty is only a deposit because any report or conversation with audit or preventive team is not a method of recovering short paid duty. Thereafter, a Show Cause Notice under Section 11A must be issued demanding the duty and proposing to appropriate the amount already deposited during audit or preventive checks towards this amount. This has not been done in this case. It was held by the Hon'ble High Court of Punjab and Haryana in the case of Century Metal Recycling Pvt Ltd vs UOI (2009 (234) ELT (234) and upheld by the Supreme Court [2009 (244) ELT- A57 (SC)] " As far as the amount deposited by the Petitioners is concerned, case of the petitioners is that the same was deposited under coercion. Case of the respondents was that the same was deposited voluntarily. Whatever be the position, unless there is assessment and demand, the amount deposited by the Petitioners cannot be appropriated. No justification has been shown for retaining the amount deposited except saying that since it was voluntarily deposited. In view of this admitted position, the petitioners are entitled to be returned the amount paid." The facts of the present case are identical.
In that circumstance, the respondent is entitled for refund claim of the amount already reversed during the course of audit.
In view of the above, we do not find any infirmity in the impugned order and any merit in the appeal filed by the Revenue and accordingly the same is dismissed.
(pronounced in the open court 10.08.2021)