2010 (8) TMI 801 - AT - Central Excise

Summary

Issues:
Disallowance of Cenvat credit for goods not exported due to accident during transit; Interpretation of Rule 16 of Central Excise Rules, 2002; Requirement of show cause notice for erroneous refund under Section 11A of Central Excise Act, 1944.

Analysis:

1. The appellant appealed against the disallowance of Cenvat credit amounting to Rs. 4,59,214 for goods that were not exported due to an accident during transit. The Assistant Commissioner initially granted the refund, but the Commissioner (Appeals) overturned this decision, citing Rule 16 of the Central Excise Rules, 2002, which allows for suo motu credit without the need for a refund claim.

2. The appellant argued that while they could have taken the credit suo motu under Rule 16, they opted to inform the Department and file a refund claim as a precautionary measure. The Commissioner (Appeals) failed to consider this aspect properly. Additionally, the appellant contended that if there was an erroneous refund, a show cause notice under Section 11A of the Central Excise Act, 1944 should have been issued for recovery, citing relevant circulars and case law.

3. The Tribunal examined the case and found that the appellant had followed the prescribed procedure by informing the Department and obtaining approval for the refund. It was established that the appellant was entitled to the credit on the goods that could not be exported due to the accident. The Tribunal agreed with the appellant's assertion that a show cause notice is necessary for recovery of an erroneous refund under Section 11A, supported by relevant circulars and legal precedents.

4. The Tribunal differentiated the present case from the cited case law, emphasizing that in this instance, the refund was initially sanctioned by the original authority and was reviewed under Section 35E, which is impermissible. Consequently, the Tribunal set aside the Commissioner (Appeals)'s decision, allowing the appeal and granting any consequential relief deemed appropriate.

In conclusion, the Tribunal upheld the appellant's entitlement to the Cenvat credit for the goods that could not be exported due to the accident during transit. The importance of following procedural requirements, such as obtaining approval for refunds, and the necessity of a show cause notice for recovery of an erroneous refund under the Central Excise Act, 1944, were highlighted in the judgment.