The Principle Bench of Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ),New Delhi, held that the absence of the requisite SCN the amount got deposited at the instance of audit team is liable to be refunded to the appellant.
The appellantM/s.Bird Audio Electronics is engaged in manufacturing of various types of speakers, who after receiving a purchase order from their customer used to sell and supply/deliver those speakers at the site of the respective customers. During an audit conducted by the Department of the appellants record, it was observed that the appellant has wrongly availed Cenvat Credit on account of service tax paid on outward freight as well as on a missing invoice No.175. However, after agreeing to the said objectionsof the audit, the appellant deposited an amount of Rs.4,72,084/- on 9-07-2018 which includes credit taken, penalty and interest.
Later the appellant filed the refund claim for the deposited amount. However, vide SCN No.88 dated 27.07.2020, it was observed based on the audit report that on being pointed out by Audit Team, party/appellant agreed with the audit objection and deposited the amount. Hence, no occasion of refund arises. Aggrieved by the order, appellant filed appeal before The Customs, Excise & Service Tax AppellateTribunal.
The appellant submitted that the Cenvat credit was rightly claimed for the service tax paid by him on the transportation charges, the sales by him being on FOR basis and also the missing invoice was also later found. Hence, the appellant was entitled for taking Cenvat Credit thereupon. The amount of duty as was obtained by the Officers at the time of duty, accordingly, was prayed to be refunded.
Respondent submitted that the payment, the refund whereof has been claimed, was not the payment under protest but was the voluntary payment.It is also submitted that the Commissioner (Appeals) has rightly held that since the appellant did not dispute the issue at the time of the audit, the Department had no opportunity to issue any SCN proposing the demand of duty.
While allowing the appeal the Hon’ble Mrs. Rachna Gupta, Member (Judicial), held that it is an admitted fact that a SCN as required in law for demand of the duty found at the time of audit/ investigation, to not to have been paid has been issued to the appellant. Though the contention of Revenue in this regard is that the appellant agreed to the objections raised by the audit party and thereafter voluntarily paid the observed short amount of duty. It was further held that “the issuance of SCN in a particular format is a mandatory requirement of law. The law requires the said SCNs to be issued under a specific provision of law and not as a correspondence or part of an order. A specific notice precisely indicating the amount demanded and calling upon the assesse to show cause if he has any objection for such demand is statutorily to be produced. The provision relevant for the purpose is Rule 14 of Central Excise Rules, which deals with recovery of Cenvat Credit wrongly taken or erroneously refunded. The sub-rule (1) of this rule mandates that such Cenvat Credit shall be recovered from the assesse in accordance of provisions of section 11A of the Excise Act or section 73 of the Finance Act”.
The Tribunal while set aside the challenged order made it clear that payment made by the appellant at the time of audit, in absence of any SCN for the same, cannot be held to be the payment against the demand raised by the Departmentand the absence of the requisite SCN the amount got deposited at the instance of audit team is liable to be refunded to the assesse.
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