2017 (2) TMI 19 - HC - Central Excise

Sick Company - CENVAT credit - refund claim - petitioner s claim is that they are sick company, and there is no point in having CENVAT credit for a sick Company. The petitioner actually wants the amount of refund to be paid to the State Bank of India, which is a secured creditor - is claim of petitioner justified? - Held that - A careful look at the order in appeal passed in favour of the petitioner directing refund, shows that this is a case where the petitioner paid excess duty, but did not pass on the incidence of such duty to any other person. Such a finding is recorded by the Commissioner (Appeals) and the said order has also attained finality. Therefore, this case, in our opinion, falls within Clause (e) under the proviso to sub-section (2) of Section 11B. The petitioner is not asking the money to be paid into his account. He is only asking the money to be paid to the State Bank of India towards discharge of some loan. In such a case, the payment to the Bank would also act, probably as a recovery for the Bank. The respondents are directed to pay the amount directly to the lien account - petition allowed - decided in favor of petitioner.

Summary

Issues:
Refusal to pay refund directly, CENVAT Fund credit, Sick Company status, Interpretation of Section 11B of Central Excise Act, 1944, Exceptions to refund crediting rule.

Analysis:
The petitioner challenged an order refusing direct refund payment and opting for CENVAT Fund credit. The Commissioner (Appeals) had allowed the refund in a finalized order. The petitioner, a sick Company under BIFR, argued against CENVAT credit due to its status and requested payment to a secured creditor, State Bank of India. The Department cited Section 11B(2) of the Central Excise Act, 1944, stating refunds must be credited to the Fund without payment. The Court noted exceptions in the proviso to Section 11B(2) allowing payment in specific cases.

The Court examined if the petitioner's case fit any proviso exception. The Commissioner's order confirmed excess duty payment without passing it on, aligning with Clause (e) of the proviso. The petitioner sought payment to the Bank for loan discharge, not personal account credit. The Court viewed this as beneficial to the Bank, potentially aiding in loan recovery. Consequently, the Court allowed the Writ Petition, directing direct refund payment to the petitioner's State Bank of India account for liability discharge.

In conclusion, the Court's judgment addressed the refusal of direct refund payment, the applicability of CENVAT Fund credit, the petitioner's Sick Company status, the interpretation of Section 11B of the Central Excise Act, 1944, and the exceptions allowing payment instead of crediting to the Fund. The ruling provided relief to the petitioner by ordering direct refund payment to the State Bank of India for liability discharge, considering the specific circumstances and exceptions under the law.