2006 (4) TMI 427 - AT - Central Excise

Summary

Issues:
1. Appeal against Order-in-Appeal disallowing Modvat credit on LDO.
2. Challenge of unjust enrichment in granting refund.
3. Interpretation of Section 11B(2)(c) of the Central Excise Act, 1944.

Analysis:
1. The appeal was filed against the Order-in-Appeal disallowing Modvat credit on LDO, which was reversed by the appellants under protest following a board circular that was later struck down by the Karnataka High Court and upheld by the Supreme Court. The Commissioner (Appeals) allowed the department's appeal on the ground of unjust enrichment, leading to the current appeal.

2. The appellant argued that the refund was protected by Section 11B(2)(c) of the Act, citing the Division Bench decision in Collector of Central Excise v. Orient Paper Mills. The Departmental Representative contended that this protection only applies when inputs are used for manufacturing products for export, supporting the Commissioner (Appeals)' finding. The Tribunal found that the refund granted to the appellant was in line with the Karnataka High Court and Supreme Court decisions, emphasizing the importance of Section 11B(2)(c) in this case.

3. The Tribunal referred to the Division Bench decision in Orient Paper Mills, which highlighted the significance of Section 11B(2)(c) in cases where the Department's actions prevent the utilization of credit. The Tribunal concluded that the appellant's situation mirrored the case in Orient Paper Mills, where the Department's denial of permission to avail benefits led to delayed utilization of credit. Following this interpretation, the Tribunal set aside the Order-in-Appeal and allowed the appellant's appeal, providing consequential relief as deemed necessary.

This judgment clarifies the application of Section 11B(2)(c) in refund cases where Departmental actions hinder the rightful utilization of credit, emphasizing the protection provided under the Act. The decision aligns with precedent and ensures that manufacturers are not unjustly deprived of their entitled benefits due to administrative delays or errors.