2012 (12) TMI 946 - AT - Central Excise

Denial of refund claim - Unjust enrichment - Burden of proof - Held that - Lower authorities have held that assessee has failed to show that duty burden has not been passed on. I find that we are not really concerned with a refund claim of duty which was paid earlier, but claimed as refund subsequently in this case. Appellant had taken credit on capital goods and on objection raised by the Revenue, as a law abiding citizen, appellant reversed it without waiting for adjudication process, but challenged the same and ultimately succeeded at Tribunal level. In this case, therefore, if appellants were to wait for the decision after adjudication process, there may not be even any reversal at all since the appellant s stand was upheld by the Commissioner (A). In these circumstances, there is no question of unjust enrichment since there was no need for a reversal in the first place. Therefore availment of credit subsequently could not have arisen. Further, after the Tribunal s decision upholding the availability of credit, appellants could have taken suo motu credit. Since the Tribunal had passed the order in favour of the appellants, when decision of the L.B. was not available, appellants could have taken credit suo motu which also they did not do - Decided in favour of assessee.

Summary

Issues Involved:
1. Availment of Modvat credit on certain items as capital goods.
2. Denial of credit by Revenue leading to appeal and subsequent orders.
3. Rejection of refund claim based on unjust enrichment, availing depreciation, and proof of reversal.

Analysis:

Issue 1: Availment of Modvat credit on certain items as capital goods
The appellants had availed Modvat credit on various items as capital goods during a specific period. A show-cause notice was issued proposing to deny the credit on the grounds that the items were not capital goods. The appellants debited amounts under protest and filed an appeal. The Commissioner (Appeals) partially allowed the appeal, which was further challenged by the department. The CESTAT upheld the Commissioner's decision, leading to a refund claim by the appellants.

Issue 2: Denial of credit by Revenue leading to appeal and subsequent orders
The Revenue initially denied the Modvat credit claimed by the appellants, leading to a series of appeals and orders. The Commissioner (Appeals) partially allowed the appeal, and the department's appeal against this decision was dismissed by the CESTAT. Subsequently, the appellants filed a refund claim which was rejected by the lower authorities, culminating in the impugned order upholding the rejection of the refund claim.

Issue 3: Rejection of refund claim based on unjust enrichment, availing depreciation, and proof of reversal
The rejection of the refund claim was based on three grounds, including unjust enrichment, the possibility of availing depreciation, and the lack of proof of reversal by the appellants. The Tribunal analyzed each ground separately. Regarding unjust enrichment, it was held that since the appellants had reversed the credit without waiting for the adjudication process and ultimately succeeded at the Tribunal level, there was no unjust enrichment as there was no need for a reversal in the first place. The Tribunal also noted that the appellants could have taken credit suo motu after the Tribunal's decision. On the issue of availing depreciation, the Tribunal found that the Revenue had raised a new issue beyond the original show-cause notice, which could not be sustained. Lastly, the Tribunal held that the appellants had indeed reversed the credit as admitted in the show-cause notice, and the Revenue could not demand further documentary evidence after twelve years. Consequently, the Tribunal concluded that all grounds for rejecting the refund claim were not valid and allowed the appeal with consequential relief to the appellants.

In conclusion, the judgment addressed the issues of Modvat credit availed as capital goods, denial of credit by the Revenue, and rejection of the refund claim based on unjust enrichment, availing depreciation, and proof of reversal. The Tribunal's detailed analysis and reasoning provided clarity on each ground, ultimately allowing the appeal in favor of the appellants.