2010 (7) TMI 361 - AT - Central Excise

Refund Excess reversal of Cenvat credit Enhanced rate of duty of Molasses - appellants reversed the CENVAT credit under protest on pointing out by the audit party - apparent on record that the appellant not purchased any molasses during the period Apr, 05 and May, 05 and the clearance during the months, not require the reversal on the enhanced rate - appellants are entitled for refund claim on account of excess reversal - order holding duty liability set aside

Summary

Issues: Appeal against denial of refund claim of Rs. 9,12,773/- by lower authorities.

Analysis:
1. The appellant engaged in the manufacture of special denatured spirit and availed CENVAT credit on inputs. Audit revealed reversal of short duty on molasses and evaporation losses during specific months in 2005. Duty on molasses was raised, leading to reversal of Rs. 9,12,773/-. Subsequently, a refund claim was filed due to excess credit reversal, rejected by lower authorities.

2. The advocate argued that the earlier refund claim rejection was remanded back by the Commissioner with observations on the nature of the received material. The adjudicating authority, post remand, verified and confirmed the material as "Kala Gud," rejecting the refund claim. The advocate contended that no input was procured during the relevant period, hence the enhanced duty reversal was unnecessary.

3. The advocate further argued against unjust enrichment, citing cases supporting the contention that subsequent reversal under protest does not violate unjust enrichment provisions. Additionally, it was argued that as it was a reversal of CENVAT credit, not duty, unjust enrichment does not apply. Similar arguments were made regarding denial of CENVAT credit on evaporation losses, citing relevant case law.

4. The Departmental Representative highlighted the need for reconsideration on the bar of unjust enrichment, referencing a relevant case law. However, upon hearing both sides, the Member (J) found that the appellants had reversed the credit under protest due to a duty rate increase, even though no molasses were purchased during the relevant period, entitling them to a refund claim for excess reversal.

5. The Member (J) ruled in favor of the appellant, setting aside the duty liability and allowing the refund claim. The decision was supported by arguments against unjust enrichment and denial of CENVAT credit on evaporation losses, with reference to specific case law. The impugned order was set aside, and the appeal was allowed with consequential relief, if any.