2011 (11) TMI 548 - AT - Central Excise

Suo moto CENVAT Credit - Assessee debited CENVAT Credit account to get a certificate from the Superintendent of Central Excise so that when the quantity was exported, drawback could be claimed from Customs - However, when certificate was not issued assessee suo moto reversed CENVAT Credit - Held that - The question of excess credit would arise when there is requirement of payment of duty. In this case there was only a proposal to remove the goods and to support the proposal and to get the certificate, reversal was made. It would mean that the reversal was pending consideration of the request by the department. Once the department refused to consider the request for issue of certificate, the reversal made was not necessary and therefore, requiring the appellant to file refund claim for this also is not necessary, since it was only a temporary reversal pending removal of the raw materials. Since the removal of the raw material did not take place, reversal itself was not necessary and therefore, subsequent re-credit is nothing but a rectification entry or an entry reversing the temporary reversal made earlier - appellant need not to file refund claim and suo motu credit taken by them is in order - Decided in favour of assessee.

Summary

Issues:

1. Whether the appellant was justified in debiting Cenvat credit account and subsequently reversing it due to non-issuance of a certificate for export of raw material?
2. Whether the decision in the case of BDH Industries is applicable to the present case?
3. Whether the reversal and re-credit of Cenvat credit by the appellant were in compliance with the law?
4. Whether the appellant should have filed a refund claim instead of taking suo motu credit?
5. Whether the appellant was required to file a refund claim for the temporary reversal of credit pending removal of raw materials?

Analysis:

1. The appellant debited and subsequently reversed Rs. 3,81,210 in their Cenvat credit account for imported raw material intended for export. The Tribunal noted that the reversal was made in anticipation of a certificate for export, which was not issued, leading to proceedings and penalty imposition under Rule 15(2) of Cenvat Credit Rules, 2004.

2. The Tribunal considered the decision in the case of BDH Industries and the appellant's argument that it was not applicable. The appellant contended that the situation in BDH Industries involved duty payment, unlike their case of correction of an entry. The Tribunal observed that the nature of the reversal did not warrant a refund claim as it was not related to actual removal of goods.

3. The Tribunal analyzed the reversal and re-credit actions of the appellant, emphasizing that the reversal was for proposed clearances that did not occur. It highlighted that duty is only payable upon actual removal of goods, which did not happen in this case. The appellant's actions were seen as rectification entries rather than unjust enrichment.

4. The Tribunal examined whether the appellant should have filed a refund claim instead of taking suo motu credit. It differentiated the present case from the BDH Industries decision, emphasizing that the reversal and re-credit were procedural steps due to the non-occurrence of proposed clearances.

5. The Tribunal concluded that the appellant's actions did not necessitate a refund claim, as the reversal was pending the export certificate issuance. The re-credit was viewed as a rectification entry, aligning with the decision in the case of Ultra Tech Cement Limited. The Tribunal allowed the appeal, providing relief to the appellant based on the unique circumstances of the case.