2014 (7) TMI 188 - AT - Central Excise

Suo moto availing of credit after getting a favorable decision - revenue contended that assessee should have filed a refund application - earlier cenvat credit was denied on the ground that credit is not admissible - Held that - It is not a situation where any duty was paid on the finished goods by debiting duty from RG-23 part-II account of the appellant and refund of such duty paid was claimed by appellant where department may be anxious to apply the doctrine of unjust enrichment. In that situation taking of suo motu credit on getting a favourable order could be objected by the Revenue. In the present facts of the case that is not the situation and by getting a favourable order appellant has become entitled to Cenvat credit on which there will not be any unjust enrichment. Therefore, it is not correct on the part of the adjudicating authority or the first appellate authority to hold that appellant should have restored to refund provisions, as doctrine of unjust enrichment is not attracted in this case. - there was nothing wrong in taking of suo motu credit after getting favourable orders from CESTAT, when unjust enrichment is not applicable - Following decision of Shyam Textile Mills v. Union of India 2004 (6) TMI 590 - GUJARAT HIGH COURT - Decided in favour of assessee.

Summary

Issues:
Admissibility of Cenvat credit on rejected goods returned to the appellant's premises as per Rule 16(1) of the Central Excise Rules, 2002.
Whether the appellant should have sought refund under Sec. 11B of the Central Excise Act, 1944 instead of taking credit suo motu.

Analysis:

Issue 1: Admissibility of Cenvat Credit
The appellant appealed against OIA No. Commr(A)/102/VDR-II/2007, dated 22-5-2007, questioning the admissibility of Cenvat credit on rejected goods returned to their premises. The appellant's representative cited previous favorable orders by the Bench in similar cases to support their argument. The Revenue's representative contended that the OIA was correctly passed. After hearing both sides and examining the case records, the Bench noted that previous appeals by the appellant on the same issue were decided in their favor. Consequently, the current appeal was also required to be allowed, affirming the admissibility of Cenvat credit on the returned goods.

Issue 2: Refund vs. Suo Motu Credit
The second issue revolved around whether the appellant should have sought a refund under Sec. 11B of the Central Excise Act, 1944 instead of taking credit suo motu. The Revenue argued that the appellant should have followed the refund procedure. However, the Bench highlighted that the appellant had previously succeeded in obtaining favorable orders allowing Cenvat credit on returned goods. The Bench emphasized that in this scenario, where duty was not paid on finished goods and then claimed as a refund, the doctrine of unjust enrichment did not apply. Citing a judgment by the Gujarat High Court, the Bench concluded that there was no fault in the appellant taking suo motu credit after receiving favorable orders from CESTAT. Therefore, the appeal was allowed, emphasizing that the doctrine of unjust enrichment was not applicable in this case.

In conclusion, the Tribunal allowed the appeal, confirming the admissibility of Cenvat credit on the rejected goods returned to the appellant's premises and asserting that the appellant was justified in taking suo motu credit based on previous favorable orders, where the doctrine of unjust enrichment did not come into play.