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2017 (5) TMI 812 - AT - Central ExciseCash refund - Cenvat credit paid through PLA and Cenvat account under protest - area based exemption - N/N. 50/2003 dated 10.06.2003 - The appellant paid the amount under protest through PLA and by reversal to Cenvat credit but later-on filed refund claim of the said amount as they were not required to pay the said amount - Held that - a similar issue has come up before this Tribunal in the case of Max Power Infosystem 2017 (1) TMI 1185 - CESTAT CHANDIGARH where the Division Bench of this Tribunal has held that at the time of opting exemption N/N. 50/2003 the assessee is not required to reverse the Cenvat credit and the Cenvat credit/amount paid through PLA is to be given in cash - appellant is entitled to refund claim and refund is paid in cash - appeal allowed - decided in favor of appellant.
Issues Involved:
1. Whether the assessee was required to reverse the credit on inputs contained in input, work in process, and finished goods lying in stock on the date of opting for exemption under Notification No. 50/2003-CE. 2. Whether the assessee is entitled to a cash refund or if it should be credited to the Cenvat Credit Account. Issue No. (a): Requirement to Reverse Credit on Inputs The tribunal examined whether the assessee was obligated to reverse the Cenvat credit on inputs, work-in-progress, and finished goods lying in stock upon opting for the exemption under Notification No. 50/2003-CE. Various judicial pronouncements were cited to settle this issue: - Saboo Alloys Pvt. Limited - 2010 (249) ELT 519 (HP): The Hon’ble High Court observed that even though the final product may be exempt from excise duty, the assessee cannot be asked to reverse the Modvat credit already taken. - Gokaldas Intimate Wear - 2011 (270) ELT 351 (Kar.): The Hon’ble Karnataka High Court held that once the input credit is legally taken and utilized on the dutiable final product, it need not be reversed even if the final product becomes exempt subsequently. This interpretation was supported by various other cases and the language of Rule 9(2) of the Cenvat Rules. - HMT - 2008 (232) ELT 217 (Tri.-LB): The larger bench of the Tribunal confirmed that there is no requirement to reverse the credit on the final product becoming exempt and such credit cannot be recovered under Rule 12 of Rules 2002. - Ranbaxy Laboratories Ltd. - 2012 (279) ELT 194 (HP): The Hon’ble Himachal High Court reiterated that the assessee cannot be asked to reverse the Modvat credit already taken even if the final product is exempt from excise duty. - United Vanaspati Ltd.: The Hon’ble High Court of Himachal Pradesh observed that the language of Rule 9(2) of the Cenvat Rules is identical to Rule 57H(5) of the Excise Rules, and thus the interpretation given by the Apex Court applies here as well. Based on these precedents, the tribunal concluded that the appellant was not required to reverse the credit in their Cenvat credit account lying unutilized when opting for the area-based exemption under Notification No. 50/2003-CE. Issue No. (b): Entitlement to Cash Refund The tribunal then considered whether the refund should be given in cash or credited to the Cenvat Credit Account. The appellant argued that since they were operating under the exemption Notification No. 50/2003-CE, the goods were exempt from duty, making the Cenvat credit account unusable. - APCO Pharma Ltd. - 2015 (319) ELT 641 (Uttarakhand): The Hon’ble Uttarakhand High Court held that if the assessee is not in a position to utilize the Cenvat Credit Account, the refund claim should be given in cash. The court found that the very basis of the refund is defeated if the credit is not usable. - Commissioner of Central Excise v. Ashok Arc - 2006 (193) E.L.T. 399: The High Court of Jharkhand also supported the notion that the assessee is entitled to a cash refund when they cannot utilize the Cenvat credit. Based on these rulings, the tribunal held that the assessee is entitled to a refund in cash as they could not utilize the Cenvat Credit Account due to the exemption. Conclusion: The tribunal affirmed that the appellant is entitled to a refund claim and that the refund should be paid in cash. The appeal filed by the revenue was dismissed, and the appeal filed by the assessee was allowed with consequential relief. The tribunal's decision was dictated and pronounced in court, confirming the appellant's right to a cash refund.
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