2008 (10) TMI 204 - AT - Central Excise

Refund of unutilized credit commissioner (appeals) allowed refund held that Refund in cash from Cenvat credit account is an exception. The only exception is in respect of credit attributable to input which has gone into export product. The decision in the case of Rajashree Cement and Purvi Fabrics & Texturise (P) Ltd. are relevant to the present facts of the case. The case of Deepak Vegetable Oil Industries has been wrongly relied upon by the Commissioner (Appeals). Therefore, his order allowing cash refund of the amount from Cenvat account is not legal and proper. - refund rejected.

Summary

Issues:
Refund of excess payment made by the respondent, utilization of Cenvat credit, legality of cash refund from Cenvat credit account.

Analysis:

1. Refund of Excess Payment: The respondent had paid Rs.11,85,426 in a dispute which was later settled in their favor. The original authority sanctioned the refund by giving credit of Rs. 8 lakhs in the Cenvat credit account and the balance by cheque. The Commissioner (Appeals) allowed the refund in cash on the ground that the respondent was unable to utilize the credit due to the closure of their factory.

2. Utilization of Cenvat Credit: The Department argued that the closure of the factory and the inability to utilize the available credit was not the responsibility of the Department. They contended that no legal provision exists for refund either by cash or by cheque from the Cenvat account except in cases where the credit is attributable to inputs used in the final product that was exported. The Department highlighted that adjusting Rs. 8 lakhs from the Cenvat credit did not involve the payment of any duty in cash or by debiting from their PLA.

3. Legality of Cash Refund from Cenvat Credit Account: The Tribunal observed that generally, credit in the Cenvat credit account is meant to be used towards the payment of duty on the final product. Refund in cash from the Cenvat credit account is considered an exception, with the only valid exception being in cases where the credit is attributable to inputs used in export products. The Tribunal found that the decision relied upon by the Commissioner (Appeals) was not applicable to the present case, and hence, the order allowing cash refund from the Cenvat account was deemed improper and not legally sound. Consequently, the Tribunal set aside the order of the Commissioner (Appeals) and reinstated the original authority's decision.

4. Conclusion: The appeal by the Department was allowed, and the Tribunal provided consequential relief as per the law. The judgment clarified the legal provisions regarding the utilization of Cenvat credit and the exceptional circumstances under which cash refunds from the Cenvat account are permissible, emphasizing the importance of adhering to relevant legal precedents and provisions in such matters.