2017 (1) TMI 159 - AT - Central Excise

Reversal of Cenvat credit under protest - Rule 6 (3) of CER 2004 - No separate book of account maintained for exempted goods - Unjust enrichment - Held that - The law contained in proviso (c) to Section 11 B (2) of Central Excise Act, 1944, is noteworthy. The proviso to Sub-Section 2 of Section 11B states that if the refund is sought of credit of duty paid on excisable goods used as inputs in accordance with rules made, or any notification issued under the Act, the refund instead of being credited to the Consumer Welfare Fund is to be paid to the appellant - Appeal dismissed - decided in favor of the assessee.

Summary

Issues:
1. Department's appeal against the order sanctioning refund to the respondent.
2. Maintenance of separate accounts for dutiable and exempted goods.
3. Reversal of CENVAT credit and subsequent appeal by the Department.
4. Refund of CENVAT credit for Furnace Oil used in the manufacture of dutiable goods.
5. Unjust enrichment and crediting refund to the Consumer Welfare Fund.

Issue 1:
The department filed an appeal against the order sanctioning refund to the respondent, which was upheld by the Commissioner (Appeals) and the original authority. The issue arose due to the maintenance of separate accounts for dutiable and exempted goods by the respondents, specifically concerning the use of Furnace Oil for both types of goods.

Issue 2:
The respondents failed to maintain separate accounts for Furnace Oil, which was used for both dutiable and exempted goods. This led to Show Cause Notices being issued by the Department, demanding payment in accordance with Rule 6(3) of CENVAT Credit Rules 2004. The respondents reversed the entire CENVAT credit under protest, leading to adjudication and subsequent appeal by the Department before the Tribunal.

Issue 3:
A scheme introduced in the budget of 2010 allowed the respondents to reverse the CENVAT credit to close any proceedings against them. The respondents opted for this scheme, leading to an Order-in-Original by the Commissioner, which was not appealed further by the Department. The Tribunal dismissed the Department's appeal, and the duty demand issue attained finality.

Issue 4:
Following the reversal of CENVAT credit, the respondents sought a refund for Furnace Oil used in the manufacture of dutiable goods. The Assistant Commissioner granted a proportionate refund after reviewing evidence and cost certificates. The Department appealed against this refund, arguing unjust enrichment, but the Commissioner (Appeals) dismissed the appeal, leading the Department to approach the Tribunal.

Issue 5:
The Department contended that the refund was subject to unjust enrichment and should be credited to the Consumer Welfare Fund. However, the respondents argued that they had reversed the CENVAT credit under protest for both exempted and dutiable goods, and the refund was based on detailed cost certificates. They relied on legal provisions exempting refund arising from duty paid on excisable goods used in manufacturing excisable goods from unjust enrichment.

In conclusion, the Tribunal upheld the decision of the Commissioner (Appeals) regarding the refund of CENVAT credit for Furnace Oil used in the manufacture of dutiable goods, citing legal provisions exempting such refunds from unjust enrichment. The appeal by the Department was dismissed, and the issue was settled in favor of the respondents.