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2014 (8) TMI 255 - HC - Central ExciseCENVAT Credit - entitlement of duty drawback - audit team noted that the petitioner had wrongly availed of CENVAT credit of the Excise duty, contrary to Rule 3(5) of the CENVAT Credit Rules, 2004, as the goods were temporarily imported capital goods, meant to be re-exported - Claim of drawback claim was rejected on the ground of period of limitation - petitioner contends that it has suffered a double tax by virtue of having paid duty at the time of import in 2007, and then having complied with the CENVAT demand along with penalty and interest in 2012, to make good its wrongful utilization of CENVAT credit. Held that:- time period to claim a duty drawback had expired by 2009, it is also equally clear that the petitioner could have reversed the CENVAT credit it had claimed in August 2009, while it awaited a relaxation of the time period under Rule 7A. The petitioner, had it paid the CENVAT demand when it received the Show Cause Notice in November 2009, would not have incurred any penalty. The petitioner was, in fact, only liable to an amount of ₹ 8,58,235/- at that time, with interest. However, the petitioner did not reverse the CENVAT credit amount in 2009, but instead only paid the CENVAT credit amount after it received the Show Cause Notice of 1.5.2012. Regardless of the petitioner's possible entitlement to a drawback, it did not reverse the CENVAT credit in 2009 despite its awareness that it had wrongly availed of the same in 2007, and thus acted contrary to Rule 3(5) of the CENVAT Credit Rules. This Court thus need not labour to discern that the petitioner had willfully retained the CENVAT credit from November 2009, when its wrongful utilization was brought to its notice, all the way up to May 2012. During this period, this credit could have in all probability been used by the petitioner for whatever purposes necessary, as all availed credit accumulates in the CENVAT credit account, which is a common account used to pay service tax, central excise duty etc. Such wrongful utilisation of CENVAT credit amounts to a loss to the Revenue, as tax owed to the Revenue is in effect being withheld. However, while awaiting the decision on time relaxation, the petitioner continued to profit from the wrongly utilized CENVAT credit till May 2012, clearly in contravention of Rule 3(5) of the CENVAT Credit Rules. The petitioner cannot be allowed a drawback on the Excise duty as that would tantamount to allowing it to profit from its unjustly derived benefit of the CENVAT credit till May 2012. This Court is thus of the opinion that the petitioner cannot be granted relief as its claim to relief is not made with clean hands - Decided against assessee.
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