2016 (7) TMI 1105 - AT - Central Excise

Wrongful use of Cenvat credit - voluntary payment of interest - Refund of the amount encashed through bank guarantee - Held that - As find that the orders of Settlement Commission has not been challenged by the Revenue and therefore, has become final. The Settlement Commission in its second order has clearly ordered that the interest of ₹ 1,46,827/- payable against the wrongful credit of ₹ 17,31,711/- to be adjusted against the excess duty paid by the appellant to ₹ 2,13,678/-. In these circumstances, the revenue has not the authority to encash the bank guarantee. However, it is seen that the amount of ₹ 44,443/- was paid against the earlier order of the Settlement Commission in which there was no such direction. Encashment of bank guarantee by the Revenue is contrary to the orders of the Settlement Commission dated 09/07/2008 and needs to be refunded to the appellant.

Summary

Issues:
1. Settlement Commission's order for adjustment of interest against excess duty paid.
2. Revenue's encashment of bank guarantee for interest payment.
3. Refund of encashed bank guarantee and voluntary interest payment.

Issue 1: The Settlement Commission's order directed the appellant to pay interest on the belated payment of duty to the extent of Rs. 4,07,779. However, due to a typographical error, the correct interest amount was Rs. 17,31,711. The Commission rectified the error and ordered the interest to be adjusted against the excess duty paid by the appellant. The appellant agreed to this adjustment, and the balance amount, if any, was to be refunded within 30 days.

Issue 2: The Revenue encashed the bank guarantee of Rs. 1,08,726 to recover the interest amount, which was given by the appellant during the investigation. The appellant requested a refund of the encashed amount and the voluntary payment of interest, but both the original and first appellate authorities rejected the request.

Issue 3: The appellant argued that since the Settlement Commission's order was final and unchallenged by the Revenue, the interest amount should have been adjusted against the excess duty paid through Cenvat credit. Therefore, the Revenue was not authorized to encash the bank guarantee. The appellant sought a refund of the encashed amount. The Revenue contended that there is no provision in the law for a cash refund of Cenvat credit or its adjustment against interest liability, citing relevant case laws.

The final decision by the Tribunal was in favor of the appellant, stating that the encashment of the bank guarantee by the Revenue was contrary to the Settlement Commission's orders. The Tribunal partially allowed the appeal, directing the Revenue to refund the encashed amount to the appellant.