2006 (11) TMI 480 - AT - Central Excise

Summary

Issues involved:
Refund of Cenvat Credit already availed on stock of LDO within factory premises as on 28-2-2003; Reversal of credit under protest; Compliance with prescribed manner for protest; Barred by limitation or not.

Refund of Cenvat Credit:
The appellant was directed to reverse the credit by the Department in accordance with a circular dated 31-3-2003. The appellant complied with this directive but did not explicitly state that the reversal was done under protest. The Karnataka High Court and subsequently the Supreme Court invalidated the circular. The lower authorities noted that the refund claim was made only after the higher forum's decision. However, the adjudicating authority contended that the protest was not made as per the prescribed procedure. The appellant argued that the reversal was done under protest following the Board Circular, which was not considered by the authorities. The appellate authority incorrectly assumed that the refund claim was voluntary after the Apex Court's judgment. Citing the Indo-Nippon Chemicals case, it was argued that the limitation period starts from the discovery of the mistake, and the appellant realized the error post the Apex Court's ruling. The authorities failed to consider this crucial aspect.

Compliance with Prescribed Manner for Protest:
The adjudicating authority claimed that the protest was not made in the prescribed manner as per the Central Excise Manual. However, the appellant argued that the reversal was done under protest following the Board Circular. The procedure under the manual pertains to duty payment, invoice preparation, and informing the Central Excise authorities of reasons for paying duty under protest. In this case, it was a credit reversal, not a duty payment, as per the circular. The lower authorities' views were deemed erroneous as the reversal was not voluntary but in compliance with the circular.

Barred by Limitation or Not:
The question of whether the claim was time-barred was raised. The appellate authority held that the claim was not barred by limitation since the circular was deemed illegal from the date of issuance. Even though the litigation lasted two years, the circular was considered void ab initio. The time spent in litigation should be excluded from the limitation period. The claim was made within one year of the Apex Court's order, aligning with the Gujarat High Court's ruling in the Indo-Nippon case, thus not barred by limitation. Consequently, the impugned order was set aside, and the appeal was allowed with any consequential relief for the appellant.