2015 (11) TMI 599 - HC - Central Excise

Refund claim - Denial of MODVAT Credit - whether the duty paid through the credit of RG23A Part II account can be ordered to be refunded with debit of the account with liberty to the Department to take action for denial of availment of modvat claim as ordered by the Tribunal - Held that - On the instructions of Superintendent of Central Excise, a declaration under Rule 173B was filed and the duty was paid. It is stated by the assessee that the said duty was paid under protest letter addressed on 14.10.1996, but the said protest letter was addressed to the Superintendent of Central Excise, which was acknowledged by him on the same day. The Superintendent is not the proper officer in terms of Rule 233B of the Rules, as the proper officer was notified as Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise. - Commissioner of Customs & Central Excise (Appeals), Hyderabad held that there was a protest under Rule 233B and the claim for refund was not time barred. The said finding was not challenged by the Revenue before the Tribunal. Now it is not open for the Revenue to contend that the protest was not before a proper officer and hence the claim for refund was time barred. Such a plea, at this stage, cannot be entertained. It is clear from the facts that the duty of ₹ 3,45,548/- was paid from the personal ledger account and the rest of the amount by credit of RG23A Part II account. The said total amount was disallowed by the Assistant Commissioner, whereas the Commissioner, in appeal, allowed to the extent of duty paid from personal ledger account to the tune of ₹ 3,45,548/- only on the ground that the DOT vide its letter dated 10.07.1998 had certified that they have not reimbursed excise duty for the supply bills raised for the said amount and further holding that there is no provision in law for restoration of the credit, once utilized in respect of the balance amount of ₹ 65,41,683/- and ₹ 26,69,033/-. - there is no evidence to show that the claimant has discharged such burden. But so far as the amount of ₹ 3,45,548/- is concerned, since the letter dated 10.07.1998 of the DOT was produced, the said amount was allowed. The modvat credit availed by the assessee was used for payment of excise duty, though under protest and there is no provision for cash refund of such duty paid through modvat credit. It is also relevant to consider Rule 57L of the Rules which says that no credit of money on the inputs used in the manufacture of the final products shall be allowed if the final products are exempt from the whole of the duty of excise leviable thereon or is chargeable to nil rate of duty. In this case, by the time of the judgment of this Court, the duty was paid from the input credits availed by the assessee. Both the authorities concurrently held that those credits cannot be reversed and there is no provision for reversal of the same. But the Tribunal directed that RG23A Part II should be ordered to be credited with the debits of duty made in the RG23A registers and the Department was given liberty to take such action as permissible under law to deny the availment of modvat claim. Since, in the instant case, the said credit was utilized for payment duty, we do not think it proper to direct the authorities to reverse the entries in RG23A registers by giving them liberty to deny the availment of modvat claim at a later point of time. Such a course of action has no sanction in law. - Decided in favour of Revenue.

Summary

Issues Involved:
1. Whether duty paid through Modvat Credit account on the clearances of cable jointing kits prior to their exemption from excisability can be granted as a refund, despite the refund claim being barred by limitation under Section 11B of the Central Excise Act, 1944.
2. Whether Modvat credit can be allowed on inputs used in exempted final products, i.e., cable jointing kits, as per Rule 57F of the Central Excise Rules, 1944.
3. Whether Modvat credit accrued on inputs used for manufacturing exempted cable jointing kits and used for duty payment on such kits can be allowed under Rule 57F of the Central Excise Rules, 1944.

Detailed Analysis:

1. Duty Paid Through Modvat Credit and Refund Claim Barred by Limitation:
The court examined whether duty paid through the Modvat Credit account on cable jointing kits, which were later exempted from excisability, can be refunded even if the refund claim was time-barred under Section 11B of the Central Excise Act, 1944. The respondent (assessee) claimed a refund based on a previous court judgment stating that the assembly of cable jointing kits does not amount to manufacture. The Assistant Commissioner initially rejected the refund claim as time-barred, but the Commissioner (Appeals) later allowed the claim, stating that the duty was paid under protest, thus exempting it from the six-month limitation period. The Tribunal upheld this view, referencing previous cases where substantial compliance with Rule 233B was deemed sufficient. The court ruled in favor of the assessee, holding that the protest was valid and thus the refund claim was not time-barred.

2. Modvat Credit on Inputs Used in Exempted Final Products:
The court addressed whether Modvat credit could be allowed on inputs used in the manufacture of exempted final products, specifically cable jointing kits. The Commissioner (Appeals) had disallowed the refund of Modvat credit used for duty payment, citing no provision for cash refund once the credit was utilized. The Tribunal, however, directed that the RG23A Part II records be credited with the debits of duty made in the RG23A registers, allowing the Department to take action to deny the Modvat claim if necessary. The court disagreed with the Tribunal, emphasizing that there is no legal provision for reversing entries in RG23A registers once the credit has been used for duty payment.

3. Modvat Credit Accrued on Inputs for Exempted Products and Duty Payment:
The court examined whether Modvat credit accrued on inputs used for manufacturing exempted cable jointing kits and used for duty payment on such kits can be allowed under Rule 57F. The Commissioner (Appeals) and the Assistant Commissioner both held that there is no provision for cash refund of duty paid through Modvat credit. The Tribunal's direction to reverse the entries in RG23A registers was found to have no legal basis. The court held that since the credit was utilized for duty payment, it could not be reversed, and there was no provision in law supporting the Tribunal's directive.

Conclusion:
The court allowed the Central Excise Appeal, ruling in favor of the Revenue and against the assessee. The Tribunal's order for reversal of entries in RG23A registers was deemed incorrect. The refund claim was not time-barred due to the valid protest, but the Modvat credit used for duty payment could not be refunded or reversed. The judgment emphasized adherence to the legal provisions and procedures for Modvat credit and refund claims under the Central Excise Act and Rules.