2006 (9) TMI 45 - AT - Central Excise

Refund - Eligibility for refund is only claim when there unutilized credit balance at the end of the quarter On facts of the case there is no balance available on 31-1-98 - Application for refund made on 23-6-1998 can t be said to be time barred

Summary

Issues:
1. Availment of deemed credit under Notification No. 29/96-C.E. (N.T.)
2. Rejection of refund claim on the ground of limitation under Section 11B of Central Excise Act, 1944

Issue 1: Availment of deemed credit under Notification No. 29/96-C.E. (N.T.)
The appellants were engaged in exporting man-made fabrics processed on a job work basis by processors manufacturing industrial fabrics under sub-heading No. 5911.90. The processors availed Modvat credit under Notification No. 5/94-C.E. (N.T.) and deemed credit under Notification No. 29/96-C.E. (N.T.) for processing grey fabrics from Chapters 54 and 55. The Preventive Officers objected to the deemed credit availed by the processors, leading to the reversal of unutilized credit balance under protest. The Commissioner later restored the credit balance, which was initially reversed.

Issue 2: Rejection of refund claim on the ground of limitation under Section 11B of Central Excise Act, 1944
The appellants sought a refund of deemed credit on grey fabrics exported under Chapters 54 and 55. The refund claim was rejected citing the bar of limitation under Section 11B of the Central Excise Act, 1944, as the claim was made after the specified period. However, the Order-in-Appeal highlighted that rejecting the refund on grounds not mentioned in the show cause notice was unsustainable. The appellants argued that the issue of limitation was not raised in earlier proceedings and therefore could not be raised now. They relied on the requirement that a ground not mentioned in the show cause notice cannot be used to deny a refund. The appellants also emphasized that the application for refund was made before the restoration of the credit balance, and thus, the bar of limitation did not apply.

The Tribunal referred to a Supreme Court decision and a previous Tribunal decision to support the appellants' arguments. It was noted that the eligibility for refund is based on the balance in the books on the last date of the quarter, and since the balance was re-credited and available after a certain date, the refund claim made earlier was not barred by limitation. The Tribunal concluded that there was no reason to withhold the refund on the grounds of limitation and set aside the impugned order, allowing the appeal.