2006 (8) TMI 338 - AT - Central Excise

Summary

Issues:
Appeal against Order-in-Appeal allowing respondent's appeal, Modvat credit availed by respondent on inputs, clearance of finished products, reversal of Modvat credit directed by lower authorities, excess rebate claim, show cause notice against recredit by respondent, demand confirmation, denial of Modvat credit, excess rebate claim payment, Tribunal judgment applicability, suo motu credit, TR-6 challan payment, settlement of law on revenue retention.

Analysis:

The appeal was filed by the Revenue against an Order-in-Appeal that allowed the respondent's appeal against an Order-in-Original confirming demand and imposing a penalty. The respondent availed Modvat credit on inputs, cleared finished products to processors, which were rejected and returned to the respondent after duty payment. Lower authorities directed the respondent to reverse the Modvat credit, which they did, understanding the law. The appellant also reversed excess sanctioned rebate claim. Subsequently, the Divisional office directed payment of excess rebate amount, which the respondent paid through TR-6 challan and recredited the reversed amount in RG23A account. Show cause notice was issued against this recredit, leading to demand confirmation and penalty imposition by the adjudicating authority.

The Commissioner (Appeals) set aside the demand and penalty, allowing the respondent's appeal, prompting the Revenue's current appeal. The respondent's advocate argued that no confirmed demand for Modvat credit existed, making the credit availed correct. Regarding excess rebate claim, it was argued that the department cannot claim what was paid twice. The Tribunal analyzed the case, finding that the Revenue hadn't issued a show cause notice confirming the denied Modvat credit amount, making the respondent's suo motu credit valid. The judgment in a similar case supported this finding. As for the excess rebate claim, since the respondent paid the amount twice to the Government, they were entitled to avail suo motu credit, as the revenue cannot retain undue amounts.

Conclusively, the Tribunal dismissed the Revenue's appeal, citing no merit. The cross-objection by the respondents was disposed of as not pressed. The judgment highlighted the correctness of the respondent's actions in availing Modvat credit and taking suo motu credit for the excess rebate payment, in line with established legal principles prohibiting revenue retention of undue amounts.