2014 (1) TMI 1473 - HC - Central Excise

Availment of suo moto credit which was reversed earlier - eligible cenvat credit credit under Rule 6(5) of CCR - Refund claim under Section 11B - Whether the assessee was entitled to take credit to the tune of Rs. 3, 21, 308/- as per Rule 6(5) of the Central Excise Rules 2004 in respect of those services specifically mentioned in the book which was earlier reversed by the assessee - Held that - assessee originally availed the Cenvat Credit on service tax for discharging its liability. However for sound reasons it reversed the credit. Strictly speaking in this process there is only an account entry reversal and factually there is no outflow of funds from the assessee to result in filing application under Section 11B of the Central Excise Act 1944 claiming refund of duty - it was not a case of refund of duty falling under Section 11B of the Central Excise Act 1944 and that the assessee was to comply with the provisions of Section 11B of the Act. The view of the Tribunal that the assessee should seek reversal in the appropriate judicial forum if the assessee was aggrieved by the earlier order herein does not arise at all. Sum of Rs. 3, 21, 308/- for which suo motu credit was taken by the assessee was forming part of Rs. 5, 38, 796/- which was earlier reversed by the assessee. On the admitted fact Rs. 3, 21, 308/- represented the enumerated input services as given under Rule 6(5) of the Cenvat Credit Rules 2004 we have no hesitation in accepting the plea of the assessee that on a technical adjustment made the question of unjust enrichment as a concept does not arise at all for the assessee to go by Section 11B of the Central Excise Act 1944 - order of the Tribunal is set aside and allow the appeal filed by the assessee and hold that legally speaking there is no impediment in the asseesee taking suo motu credit - Decided in favour of assessee.

Summary

Issues Involved:
1. Whether the Tribunal was right in dismissing the appeal on the ground that the appellant should have filed an appeal against the earlier order for claiming re-credit.
2. Whether the Tribunal was correct in dismissing the appeal based on the procedure for taking suo motu re-credit versus filing a refund claim under Section 11B of the Central Excise Act, 1944.
3. Whether the Tribunal erred in not considering previous judgments that permitted suo motu recredit without requiring a refund claim under Section 11B.
4. Whether the Tribunal was right in directing the appellant to seek redressal in a higher judicial forum when the entitlement for credit was based on Rule 6(5) of the Cenvat Credit Rules, 2004.

Detailed Analysis:

Issue 1: Filing an Appeal Against the Earlier Order for Re-Credit
The Tribunal dismissed the appeal on the grounds that the appellant should have contested the earlier order dated 04.12.2007 to claim re-credit. The High Court found that the Tribunal's decision was not justified as the appellant's entitlement to the credit was not disputed by the third respondent and was not reviewed or appealed by the second respondent. The Court emphasized that the appellant's entitlement was based on Rule 6(5) of the Cenvat Credit Rules, 2004, which allows credit for specified services unless used exclusively for exempted goods or services.

Issue 2: Suo Motu Re-Credit vs. Filing a Refund Claim
The Tribunal held that the appellant should have filed a refund claim under Section 11B of the Central Excise Act, 1944, instead of taking suo motu re-credit. The High Court disagreed, stating that the reversal of credit was merely an accounting entry without actual outflow of funds, thus not necessitating a refund claim under Section 11B. The Court noted that the appellant was entitled to the credit under Rule 6(5) and that the suo motu re-credit was in line with the Tribunal's earlier decision.

Issue 3: Consideration of Previous Judgments
The appellant cited various Tribunal judgments supporting suo motu recredit without requiring a refund claim under Section 11B. The High Court observed that the Tribunal failed to consider these judgments, which had categorically held that such recredits are permissible. The Court reiterated that the appellant's action was justified based on Rule 6(5) and the clarifications provided by the CBEC.

Issue 4: Seeking Redressal in a Higher Judicial Forum
The Tribunal suggested that the appellant should seek redressal in a higher judicial forum if aggrieved by the earlier order. The High Court found this direction unnecessary, as the appellant's entitlement to the credit was based on Rule 6(5) and was not contingent on the earlier order. The Court clarified that the appellant's re-credit was a technical adjustment and did not involve unjust enrichment, thus not requiring compliance with Section 11B.

Conclusion:
The High Court set aside the Tribunal's order and allowed the appeal, affirming that the appellant was entitled to take suo motu credit of Rs.3,21,308/- under Rule 6(5) of the Cenvat Credit Rules, 2004. The Court held that there was no legal impediment in the appellant's action and that the provisions of Section 11B did not apply to the re-credit in question. The appeal was allowed, and the connected miscellaneous petition was closed without costs.