2010 (10) TMI 999 - AT - Central Excise

Refund claim - denial on the ground that the credit of specified duty can only be allowed in respect of inputs used in the final products cleared for export under Bond - Whether the deemed credit amount taken by the appellant in their Cenvat credit account register during March, 2007 i.e. after the deemed credit scheme is rescinded vide N/N. 8/2003-C.E. (N.T.), dated 1-3-2003? - Whether the deemed credit amount shall lapse after the scheme rescinded? - Held that - The appellant is entitled to transfer the deemed credit balance into Cenvat credit account on denial of refund claim which was paid in cash. As such the impugned order is maintainable - credit available on inputs used in the manufacture of the final product is the credit of duty paid on such inputs. However the government from time to time, keeping in view the difficulties faced by the industry as regards production of documents, allow such credit on the basis of deeming provisions, as if the duty stands paid on the inputs so utilized - appeal rejected - decided against Revenue.

Summary

Issues:
1. Refund of accumulated deemed credit under Cenvat Credit Rules, 2001.
2. Rejection of refund claim by Commissioner (Appeals).
3. Appeal against the rejection of refund claim.
4. Show cause notice issued by CESTAT.
5. Recovery of erroneously sanctioned refund.
6. Contravention of Cenvat Credit Rules, 2004.
7. Appeal before Commissioner (Appeals) regarding deemed credit lapse.
8. Revenue's contention on modvat credit lapsing.
9. Differentiation between deemed modvat credit and modvat credit.

Analysis:

1. The appellant lodged a refund claim for accumulated deemed credit under Cenvat Credit Rules, 2001, which was rejected initially. The Commissioner (Appeals) later set aside this rejection and allowed the refund, subject to filing an indemnity bond.

2. The CESTAT, in a subsequent appeal, set aside the Commissioner (Appeals)' decision, citing non-fulfillment of specific conditions under Notification No. 11/2002-C.E. (N.T.). The appellant was issued a show cause notice for recovery of the refunded amount.

3. The subsequent order for recovery was challenged, leading to another show cause notice for contravention of Cenvat Credit Rules, 2004. The Additional Commissioner confirmed the demand, interest, and imposed a penalty, which was appealed by the appellant.

4. The Commissioner (Appeals) framed the issues of whether the deemed credit amount lapses after the scheme is rescinded and held that the appellant was entitled to transfer the deemed credit balance into the Cenvat credit account, disagreeing with the Revenue's contention.

5. The Revenue contended that modvat credit on deemed credit would lapse upon rescinding the scheme, but the Commissioner (Appeals) found no difference between deemed modvat credit and modvat credit, rejecting the Revenue's argument.

6. The judgment emphasized that the entitlement of credit in both cases is the same, and the differentiation sought by the Revenue was not valid. The appeal filed by the Revenue was ultimately rejected.

This detailed analysis covers the issues surrounding the refund claim, rejection, subsequent legal actions, and the final decision regarding the lapsing of deemed credit and differentiation between various forms of credit under the Cenvat Credit Rules.