Issuance of Show cause notice mandatory for recovery of erroneous refund granted

Brief Facts

The assessee is engaged in the manufacture of automobile parts and components. The assessee cleared waste and scrap and replacement of defective products without payment of duty. The period in question pertains to September, 1998. On the ground that the investigation revealed that the assessee cleared waste and scrap and replacement for defective products without payment of duty and also resorted to under-valuation of the goods, adjudication proceedings were initiated and pending adjudication, the assessee deposited Rs.1.55 Crores under protest for the purpose of co-operating with the investigation of the Department. A show cause notice dated was issued on the assessee invoking the extended period of limitation as provided under proviso to Section 11A (1) of the Central Excise Act, demanding duty, interest and also penalty. After adjudication, the demand was confirmed by the Commissioner of Central Excise. Against the said order of the Commissioner, an appeal was filed to the Tribunal and the Tribunal set aside the impugned order of adjudication and allowed the appeal of the assessee.

Pursuant to the same, the assessee filed a claim for refund of deposit made under protest, including the deposit made at the time of filing the appeal to the Tribunal. The said refund application was sanctioned by the jurisdictional Assistant Commissioner. However, no appeal was filed against the order of the Assistant Commissioner of Central Excise, ordering refund.

The Commissioner of Central Excise, however, took up the matter in exercise of powers conferred under Section 35E (2) of the Act and directed the authority to file an appeal to the Commissioner (Appeals) within the time limit prescribed thereunder. On the appeal filed by the Department, the Commissioner (Appeals) took up the same and allowed the appeal filed by the Department and directed the jurisdictional authority to verify the plea with regard to unjust enrichment.

The assessee went on appeal before the Tribunal against the said order of the Commissioner (Appeals). The Tribunal, in the said appeal, came to hold that there was no case of unjust enrichment on the facts of the said case, as the assessee had produced the Chartered Accountant’s certificate to the effect that refund claim has not been passed on to the customers.

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