2017 (1) TMI 148 - AT - Central Excise

Refund - the provisions of Rule 57Q(3) whereby restriction for taking MODVAT credit to the extent of 75% - appellant filed refund claim in respect of remaining 25%. The refund was rejected on the ground that the appellant has not paid any duty for which they claimed refund - Held that - the appellant was supposed to get 100% MODVAT credit whereas they have availed only 75% and for the remaining 25% they have filed a refund claim. The authority below, even if they had the view that the refund is not governed by Section 11B, they could very well allow MODVAT credit by way of credit in the MODVAT account. Under the circumstances, when the law permits for availing 100% credit whether by way of refund or by way of allowing the credit, the appellant is entitled for the credit and the substantial benefit which is legally permissible, the appellant cannot be deprived of the same - the appellant is entitled to take credit of 25% in their MODVAT/CENVAT account - appeal allowed - decided in favor of appellant.

Summary

Issues:
Applicability of Rule 57Q(3) on raw material and components, rejection of refund claim for not paying duty, entitlement to 25% credit, interpretation of Section 11B for refund claims.

Analysis:

The case involved a dispute regarding the availing of CENVAT credit for inputs and raw materials imported under a project import. The appellant had availed only 75% of the credit as per Rule 57Q(3) of the Central Excise Rules 1944. Initially, there was confusion about whether the 75% restriction applied to raw materials and components. Subsequently, it was clarified that such restriction did not apply to procurement of input/raw material. The appellant then filed a refund claim for the remaining 25%, which was rejected on the grounds of not paying duty, as per Section 11B. The adjudicating authority and the Commissioner (Appeals) upheld the rejection, stating that the refund claim should be for duty paid. The appellant argued that they were entitled to the 25% credit as per law, citing previous tribunal orders in their favor.

The appellant contended that they were entitled to the balance credit of 25% as they had only availed 75% of the credit. They argued that the claim was legal and correct, as they sought a refund of the amount due to them. The appellant highlighted previous tribunal orders where similar issues were resolved in their favor. The Revenue, represented by the Assistant Commissioner, reiterated the findings of the impugned order and relied on a judgment of the Tribunal in another case.

The Tribunal carefully considered the submissions from both sides and noted that the refund claim was rejected solely because the appellant had not taken the 25% credit. The Tribunal found it unreasonable to deny the refund claim on this basis, as the appellant was legally entitled to the credit. Whether the claim was for paid or due amounts, the refund could be entertained. The Tribunal emphasized that the appellant was supposed to receive 100% credit, and for the unavailed 25%, the refund claim was justified. The Tribunal held that the appellant was entitled to the credit and should not be deprived of the substantial benefit legally permissible. Consequently, the Tribunal set aside the impugned order and allowed the appeal, granting the appellant the 25% credit in their MODVAT/CENVAT account.

In conclusion, the Tribunal ruled in favor of the appellant, emphasizing their entitlement to the 25% credit, which had been wrongly denied. The decision highlighted the legal right of the appellant to claim the credit, irrespective of whether it was availed initially, and underscored the importance of upholding legal entitlements in such matters.