2014 (1) TMI 1792 - AT - Central Excise

Refund claim - CENVAT credit - benefit of N/N. 6/2002-CE dt. 1.3.2002 - contention of the appellant is that as the credit has been rightly availed and rightly utilized on payment of duty. Therefore, the reversal of credit availed on inputs is not to be reversed at the time of availing exemption notification, therefore filed refund claim - appeal was rejected on the ground that the appellants required to reverse the credit of duty paid on inputs contained in the finished products lying in stock on the date appellant opted for exemption notification - Held that - The Honble Punjab and Haryana High Court in the case of CCE Vs. HMT (TD) Ltd. 2010 (4) TMI 1036 - PUNJAB AND HARYANA HIGH COURT held in favor of the manufacturer - the matter requires reconsideration by the adjudicating authority afresh - appeal allowed by way of remand.

Summary

Issues:
Appeal against order-in-appeal passed by Commissioner of Central Excise (Appeals), Mumbai-II regarding reversal of credit availed on inputs at the time of availing exemption notification.

Analysis:
The appellants, engaged in the manufacture of Anti HIV formulations under the Cenvat Credit Scheme, availed credit for duty paid inputs used in the manufacture of excisable goods. They opted for the benefit of an exemption notification and reversed the credit by paying through PLA for the inputs in finished goods. Subsequently, they filed a refund claim for the reversed amount, contending that the credit rightfully availed and utilized on payment of duty should not have been reversed at the time of availing the exemption notification. The adjudicating authority rejected the refund claim, which was upheld by the Commissioner (Appeals).

The appellant argued that based on decisions of various High Courts, the credit already utilized need not be reversed at the time of opting for exemption. They cited cases such as Commissioner of Central Excise Vs. HMT (TD) Ltd. and Commissioner of C. Ex., Bangalore-II CE Vs. Tafe Ltd., where it was held that the credit need not be reversed. On the other hand, the revenue relied on Tribunal decisions to argue against the admissibility of the refund claim.

The Tribunal found that the lower authorities rejected the claim based on the requirement to reverse the credit of duty paid on inputs at the time of opting for the exemption notification. However, considering the decisions of the Honble High Court favoring the manufacturers in similar cases, the Tribunal remanded the matter to the adjudicating authority for fresh consideration. The adjudicating authority was directed to decide the claim afresh, keeping all issues open, including the issue of unjust enrichment. The appeal was disposed of by way of remand for further adjudication.