2014 (6) TMI 936 - Commissioner - Central Excise

Recovery of erroneous availment of refund for an amount paid as duty on HV/LV coils used in the repair of old transformers - Held that - The appeal of the Revenue on the issue of recovery of erroneous availment of refund for an amount paid as duty on HV/LV coils used in the repair of old transformers, is upheld and the findings of the adjudicating authority in the impugned order with regard to non-deduction of said amount paid as duty on the said HV/LV coils are set aside. Further, the Respondents are ordered to pay back the same through debit entry in their PLA account with re-credit of same amount in their Cenvat credit account. The appeal of the Revenue on the issue of admissibility of year-end differential amount of refund for the month of March, 2011, in terms of the value addition norms is partially allowed and the impugned order is modified to the extent, as hat the Respondents are entitled to 50% of the amount due to them as per directions of the Hon ble High Court issued vide interim order dated 8-5-2013, on furnishing of solvent surety to the satisfaction of the jurisdictional Commissioner, subject to the final outcome of decision in LPA filed by the department before the Hon ble High Court of J&K or any final decision of the Hon ble Apex Court of India, etc.

Issues Involved:
1. Admissibility of refund for an amount paid as duty on non-excisable activity of repair of old transformers.
2. Admissibility of year-end differential refund for the month of March 2011, in terms of value addition norms.

Issue-wise Detailed Analysis:

1. Admissibility of refund for an amount paid as duty on non-excisable activity of repair of old transformers:

The Respondents had availed a refund by way of self-credit for Rs. 1,19,036/- on HV/LV coils used for repairing old transformers. The Revenue argued that this refund was not admissible as the activity of repair does not amount to manufacture. The adjudicating authority did not deduct this amount while computing the year-end differential refund, reasoning that show cause notices for recovery had already been issued.

The Respondents agreed with the Revenue's contention and had suo motu repaid the refund amount through a debit entry in their Cenvat credit account. However, the adjudicating authority noted that the refund should have been paid back through the PLA account since the initial refund was availed by self-credit in the PLA after exhausting the Cenvat credit.

Relying on the Hon'ble CESTAT's decision in Commissioner of C.Ex., J&K, Jammu v. Continental Transformers [2012 (285) E.L.T. 435 (Tri.-Del.)], it was concluded that excise duty was not leviable on HV/LV coils used in repair, and thus, the Respondents could not benefit from the notification. The Respondents were ordered to pay back the refund through a debit entry in their PLA account and were allowed to re-credit the same amount in their Cenvat credit account.

2. Admissibility of year-end differential refund for the month of March 2011, in terms of value addition norms:

The Respondents claimed a 100% refund for March 2011 based on an interim stay granted by the Hon'ble High Court of J&K on 24-3-2011, which was later modified on 8-5-2013. The modification ordered that 50% of the amount due should be released to the Respondents upon furnishing solvent surety to the jurisdictional Commissioner.

The adjudicating authority observed that the interim directions of the Hon'ble High Court would apply, meaning the Respondents were not entitled to a full refund. The amount in excess of the value addition norms sanctioned was liable for recovery. The Respondents had not yet furnished the required solvent surety.

It was concluded that the Respondents were entitled to 50% of the amount due upon furnishing solvent surety, subject to the final outcome of the decision in the LPA filed by the department or any final decision by the Hon'ble Apex Court of India. The Respondents could approach their jurisdictional refund sanctioning authority for the release of 50% of the amount due upon compliance with the conditions of the interim order dated 8-5-2013.

Order:

1. The appeal of the Revenue on the issue of recovery of erroneous availment of refund for an amount paid as duty on HV/LV coils used in the repair of old transformers is upheld. The Respondents are ordered to pay back the same through a debit entry in their PLA account with a re-credit of the same amount in their Cenvat credit account.

2. The appeal of the Revenue on the issue of admissibility of the year-end differential amount of refund for March 2011, in terms of value addition norms, is partially allowed. The impugned order is modified accordingly.

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