M/S Chemical And Petro Chemical Industries vs. The Union Of INDIA And 3 Ors

Held

The Court held that the respondent authorities could not recover the refunded amounts by issuing a demand-cum-recovery notice without following the procedure prescribed under Section 11A(1) of the Central Excise Act, 1944. The Court found that admittedly, no show cause notice was issued prior to the demand notice. The Act clearly mandates that where an amount has been erroneously refunded, a notice must be issued requiring the person to show cause why they should not pay the specified amount. The Court noted that the Supreme Court judgment in M/S VVF Limited did not grant liberty to the revenue to proceed for recovery of amounts previously refunded on the strength of that judgment. The Court emphasized that the Central Excise Act is a complete code and its prescribed procedures must be diligently followed. Therefore, despite the undertaking given by the petitioner, the revenue authorities were mandatorily required to follow the statutory procedure, which includes arriving at a finding that the refund was erroneously made by issuing a show cause notice. The demand notice was set aside, and the respondents were at liberty to proceed by following the due process of law.

Facts

The petitioner, M/s Chemical and Petro Chemical Industries, challenged a demand-cum-recovery notice dated July 2, 2021, issued by the Central Excise Department. The notice demanded recovery of ₹1,10,19,633/- along with interest. The petitioner argued that the refunds previously made to them were based on orders from the Gauhati High Court and the Supreme Court. These refunds were made pursuant to a Supreme Court order allowing 50% of claims subject to furnishing surety bonds. The petitioner contended that the respondent authority could not recover the amount without prior notice and due procedure. The respondents argued that the petitioner had executed a surety bond explicitly stating liability to refund upon demand by a government-appointed authority.

Key Issues

1. Whether the respondent authorities can recover previously refunded amounts without issuing a show cause notice as mandated by Section 11A(1) of the Central Excise Act, 1944, despite the petitioner having furnished an undertaking to refund upon demand? Petitioner's arguments: The petitioner contended that the refunds were made pursuant to specific court orders and that the respondent authority could not recover the amount without following the due procedure prescribed under the Act, specifically the issuance of a show cause notice under Section 11A(1). They relied on the principle that an Act must be done in the manner prescribed or not at all, citing Commissioner of Police vs. Gordhandas Bhanji. The Supreme Court judgment in M/S VVF Limited did not grant liberty for automatic recovery. Respondents' arguments: The respondents argued that the petitioner had duly executed a surety bond with a clear provision for refund upon written demand by any authority appointed by the government. Therefore, they contended there was no infirmity in the demand notice and the petitioner was liable to pay based on the undertaking.