2010 (8) TMI 488 - AT - Central Excise

Interest - The demand was confirmed against the respondents by denying the benefit of modvat credit - The said credit was deposited by the respondents from their modvat credit - However, subsequently their appeal was allowed by Commissioner (Appeals) with consequential relief. Accordingly, the assessee filed refund claim - The said refund was granted by Assistant Commissioner by way of re-credit in their cenvat account - Dispute in the present appeal of the Revenue is only relates to interest part. Held that the payment of duty was originally made by the assessee by debiting in cenvat credit account - The assessee has not been able to show as to whether on account of such debit entry, hey were debarred from utilizing the said credit and were compelled to pay duty out of PLA - Only if the assess was put to disadvantageous position on account of debit of the modvat credit, they can be said to prejudice by the departmental action - If the said amount of debit was required to be remained only as a paper entry in the credit account, the assessee s claim of interest cannot be upheld - Neither side is able to place on record the various dates on which the debit entry was made, the quantum of credit available in between period, the quantum of payment of duty out of PLA during the said period - Hence, set-aside the impugned order and remand the matter to original adjudicating authority for deciding the assessee s claim of interest .

Summary

Issues:
1. Denial of modvat credit benefit leading to refund claim.
2. Dispute over the mode of refund - credit in modvat account or cash.
3. Contention regarding interest payment on the refund amount.

Analysis:
1. The appeal arose from the denial of modvat credit benefit to the respondents initially, which was later allowed by the Commissioner (Appeals) with consequential relief. Subsequently, the respondents filed a refund claim for the pre-deposit amount and penalty. The Assistant Commissioner granted the refund by re-crediting the amount in the cenvat account and issuing a cheque for the penalty. The dispute primarily revolved around the grant of modvat credit and the subsequent refund claim.

2. The respondents contended that since their final products became exempted from duty payment, refunding the amount by crediting the modvat account would not benefit them. They requested a cash refund, which the Commissioner (Appeals) accepted, along with interest payment. The issue in dispute was narrowed down to the mode of refund - whether it should be in cash or through a credit in the modvat account.

3. The focus of the present appeal was on the interest component of the refund. The Tribunal noted that the duty payment was originally made by debiting the cenvat credit account, and the goods became exempted in 2004. However, it was unclear whether the initial debit entry in 2000 had disadvantaged the assessee, leading them to pay duty out of PLA. The Tribunal emphasized the lack of clarity regarding dates of entries, credit availability, and duty payments. Consequently, the Tribunal set aside the previous order and remanded the matter to the original adjudicating authority for a detailed examination of the interest claim based on the observations made.

In conclusion, the Tribunal disposed of the Revenue's appeal by directing a reassessment of the interest claim, highlighting the importance of clarifying the impact of the initial debit entry on the assessee's position.