2018 (2) TMI 539 - AT - Central Excise

Eligibility of re-credit - rejection of refund claim - Held that - Once the refund has been rejected the Appellant become eligible for the recredit of such amount. Since the disputed Cenvat credit has not been utilized therefore the Appellant has right to re-credit the same. The reversal of Cenvat credit is not payment of duty and therefore provisions of Section 11B of the Central Excise Act 1944 are not applicable and as such the credit is permissible to the Appellant. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against Order-in-Appeal confirming demand and penalty - Reversal and re-credit of cenvat amount - Validity of suo moto credit - Requirement of refund claim - Interpretation of Section 11B of Central Excise Act, 1944.

Analysis:
The appeal was filed against the Order-in-Appeal confirming a demand and penalty imposed on the Appellant. The Appellant had initially filed a refund of terminal excise duty but recredited the cenvat amount after the refund was rejected. The issue arose when the re-credit was done without valid documents, leading to a show cause notice for recovery of the amount and penalty imposition. The Appellant argued that they had debited the cenvat credit at the time of filing the refund and had requested a certificate from the Range Superintendent, which was not issued, resulting in the rejection of the refund claim. The adjudicating authority ordered the recovery of the amount and imposed a penalty, stating that suo moto credit is impermissible. The Commissioner (Appeals) upheld this decision, prompting the present appeal.

The Appellant contended that the debiting of the amount at the time of the refund was not disputed, and since the refund was not allowed, they re-credited the amount. They argued that the credit disallowance was based on the premise that suo moto credit is not allowed, which they believed was incorrect. On the other hand, the revenue maintained that suo moto credit is impermissible, citing the decision of the Tribunal in a previous case. After hearing both parties and examining the records, it was noted that the cenvat amount had indeed been reversed during the refund application process. The Appellant, having become eligible for recredit after the refund rejection, was within their rights to do so since the disputed credit had not been utilized.

The crucial issue revolved around the permissibility of suo moto re-credit without the need for a refund claim. Citing a judgment of the Hon'ble Madras High Court, it was established that the reversal of cenvat credit did not constitute a payment of duty, thus the provisions of Section 11B of the Central Excise Act, 1944, pertaining to refund claims, were not applicable. The judgment emphasized that a refund claim was not necessary for making a reverse entry in the cenvat account when there was no outflow of funds from the assessee. Consequently, the impugned order was set aside, and the appeal was allowed with consequential reliefs, in line with the legal interpretation provided by the court.