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2017 (6) TMI 895 - AT - Central ExciseAdjustment of sanctioned refund towards other alleged dues - It is the case of the appellant that no SCN has been issued raising such demand and that the department cannot adjust the alleged demand of ₹ 4,61,268.36 and ₹ 7,87,024/- being interest thereon from the sanctioned refund - appellant claims that the department has suo moto adjusted the refund / rebate against duty demand which has never been adjudicated or crystalized by issuance of a SCN - Held that: - The SCN dated 18.12.1982 admittedly did not raise any demand of duty. The allegation raised in the said SCN was only with regard to classification and proposal for denying the exemption under N/N. 66/82. This being the case, the department cannot unilaterally adjust the amounts from the sanctioned refund. It has also to be mentioned that with effect from 28.2.1986, the new Central Excise Tariff Act, 1985 came into force and the impugned products were brought under different classification i.e. Chapter 48. The N/N. 66/82 was rescinded. The department has taken this opportunity to include in the show cause notice the proposal for demand of duty and interest. Relating to the classification dispute raised in the SCN dated 18.12.1982. In our view, such a SCN issued belatedly after adjustment of the rebate / refund claim, and that too after much agitation of the issues, is not legal and proper. The Hon’ble Supreme Court in the case of Metal Forgings Vs. Union of India [2002 (11) TMI 90 - SUPREME COURT OF INDIA] has held that a SCN is a mandatory requirement for raising demand. The letter dated 2.5.2003 or 14.5.2003 issued by the department raising the demand for the first time or the show cause notice dated 13.5.2004 issued by the department belatedly pursuant to Order-in-Appeal dated 8.1.2004 will not take the place of a show cause notice for the dispute relating to the show cause notice dated 18.12.1982. Whether the department can suo moto adjust from the sanction refund / rebate? - Held that: - reliance placed in the case of COMMISSIONER OF C. EX., BANGALORE-III Versus STELLA RUBBER WORKS (UNIT-II) [2013 (3) TMI 299 - KARNATAKA HIGH COURT], where it was held that Section 11 of the Central Excise Act, 1944 does not contemplate adjustment of monies due to the assessee towards the amount due to the revenue. The SCN dated 18.12.1982 did not quantity the differential duty demand arising out of the denial of benefit of N/N. 66/82. As a consequence to Supreme Court's decision in the absence of SCN quantifying demand, it is not possible to say that the appellant is liable to pay the duty demand / interest confirmed in the denovo adjudication order No. 16/2005 dated 31.1.2005. The SCN dated 13.5.2004 cannot be taken to correct the flaw or fill in the lacuna in the SCN dated 18.12.1982. Therefore, it cannot be concluded that the amount adjusted to the sanctioned refund has been properly quantified. Such adjustment of uncrystalized demand is against law. The appellant is eligible for the entire refund/rebate - adjustment set aside - appeal allowed - decided in favor of appellant.
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