2013 (1) TMI 585 - AT - Central Excise

Refund claim on wrong reversal of CENVAT Credit - rejection of refund invoking period of limitation - whether the claim for refund of wrongly reversed Cenvat Credit/Modvat Credit is subject to the limitation period prescribed under section 11B - Held that - As decided in Indo-Nippon Chemicals Co. Ltd. Vs. Union of India reported 2002 (2) TMI 136 - HIGH COURT OF GUJARAT AT AHMEDABAD that refund/re-credit of Cenvat Credit wrongly reversed, would be subject to the provisions of Section 11B, as Modvat/Cenvat Credit is nothing but a constituent of duty. In view of this, the refund/re-credit of the wrongly reversed Cenvat Credit would be subject to the provisions of Section 11B and the limitation period prescribed in Section 11B would be applicable for filing the refund claim for Modvat Credit. Relevant date from which the limitation period has to be counted - Held that - Hon ble High Court in the case of Indo-Nippon Chemicals Co. Ltd.(Supra) has held that when reversal of Modvat Credit was on insistence of Department and subsequently the reversal was found to be wrong, the provisions of Section 17 of Limitation Act would be applicable and limitation period would run from the date on which the mistake was discovered by the appellant. Ascertainment as to whether the reversal was on the insistence or instructions of the Departmental Officers - Held that - On this point there is dispute, as while the Department claims that the reversal in both the cases had been made by the appellant on their own without any instructions in this regard to them, Contrary to this, the appellant in their reply dtd. 02.09.01 to the Show Cause Notice have made the submissions that reversal of credit was done without any protest but on the context of wrong interpretation of rule by departmental officers advising reversal of such credit. The learned DR had been asked file his written submissions on this point but the same have not been filed in view of this, the matter has to be remanded once again to the Commissioner (Appeals) and ascertain as to whether the reversal was on advice or instructions of the Departmental Officers or made by the appellant on their own, as per their own interpretation of rules without any advice or any instructions.

Summary

Issues Involved:
1. Reversal of Cenvat Credit on the instructions of Departmental Officers.
2. Applicability of the limitation period under Section 11B for refund claims.
3. Determination of the relevant date for the limitation period.
4. Applicability of judgments from different High Courts.

Issue-wise Detailed Analysis:

1. Reversal of Cenvat Credit on the Instructions of Departmental Officers:
The appellant, a manufacturer of various yarns and fabrics, reversed Cenvat Credit on the instructions of the jurisdictional Central Excise Officers. The reversal was done without filing any protest, although the appellant claimed it was based on departmental advice. Subsequently, the appellant realized the reversal was not required and filed refund claims. The original adjudicating authority and the Commissioner (Appeals) rejected these claims as time-barred. The Tribunal remanded the matter multiple times for reconsideration, focusing on whether the reversal was indeed on departmental instructions.

2. Applicability of the Limitation Period under Section 11B for Refund Claims:
The appellant argued that the reversal should be considered as done under protest, thus exempting the refund claim from the limitation period under Section 11B. They cited various judgments, including Opel Alloys Pvt. Ltd. and Laxmi Board & Papers Mills Ltd., where amounts deposited during investigation were treated as paid under protest. The Department, however, maintained that the refund of Cenvat Credit is subject to the provisions of Section 11B, as supported by the Gujarat High Court's judgment in Indo-Nippon Chemicals Co. Ltd.

3. Determination of the Relevant Date for the Limitation Period:
The Tribunal needed to ascertain whether the reversal was on the advice or instructions of the Departmental Officers. If so, the limitation period would start from the date the appellant discovered the mistake, as per Section 17 of the Limitation Act. The appellant claimed that their reversal was based on departmental advice, which should make the limitation period start from the discovery of the mistake. The Department contended that the reversal was done voluntarily by the appellant without any instructions.

4. Applicability of Judgments from Different High Courts:
The appellant relied on the Allahabad High Court's judgment in Ram Swarup Electricals Ltd., which dealt with the time limit for availing Cenvat Credit. However, the Tribunal found that this judgment did not address the issue of refund for wrongly reversed credit. Instead, the Gujarat High Court's judgment in Indo-Nippon Chemicals Co. Ltd. was deemed more relevant, holding that the refund of wrongly reversed credit is subject to Section 11B.

Conclusion:
The Tribunal remanded the matter to the Commissioner (Appeals) to ascertain whether the reversal was on the instructions of the Departmental Officers. If so, the limitation period would start from the date of discovery of the mistake. The Commissioner (Appeals) was directed to decide the matter within three months, considering the observations made. The Tribunal emphasized that the relevant date for the limitation period should be determined based on the appellant's correspondence with the department regarding the discovery of the mistake.