2017 (9) TMI 908 - AT - Central Excise

Refund of CENVAT credit reversed - input services - appellant reversed the Cenvat credit but no show cause notice was issued for reversal of Cenvat credit and on relising that appellant has correctly taken the Cenvat credit, the appellant filed refund claim in time - Held that - To reject the refund claim filed by the appellant, no show cause notice was issued. For adjudication of a refund claim, if some refund claim is not maintainable, the Adjudicating Authority is required to issue show cause notice giving reasons for rejection of the refund claim. In this case, the said exercise has not been done. Therefore, the refund claim cannot be rejected on these grounds itself. Whether the appellant is entitled to CENVAT credit? - Held that - mere name of the supplier/ manufacturer mentioned wrongly by the registered dealer against which invoices were issued, Cenvat credit cannot be denied, where the appellant has received the goods and paid duty thereon - appellant entitled to CENVAT credit. CENVAT credit - insurance claim - Held that - The insurance company never reimbursed the duty or tax payable on those goods. It is a fact on record that no duty part has been reimbursed by the insurance company - the Cenvat credit on the goods lost in fire is not required to be reversed by the appellant. Refund allowed - appeal allowed - decided in favor of appellant.

Summary

Issues: Appeal against rejection of refund claim due to denied Cenvat credit.

Analysis:
1. Refund Claim Rejection: The appellant contested the rejection of their refund claim, which was based on the denial of Cenvat credit by the authorities. The appellant had initially reversed the credit but later realized the error and filed for a refund. The key argument was the lack of show cause notice for the denial of credit or rejection of the refund claim, which the appellant's counsel emphasized as a procedural flaw.

2. Grounds for Denial of Cenvat Credit: The denial of Cenvat credit was based on three primary grounds: incorrect mention of supplier/manufacturer name, insurance claim related to capital goods lost in fire, and availing credit for invoices issued in the name of the head office despite having only one operational factory. The appellant's counsel presented counterarguments for each ground to support the claim for refund.

3. Procedural Compliance: The Tribunal noted that no show cause notice was issued for the reversal of Cenvat credit or the rejection of the refund claim. It was highlighted that for adjudicating a refund claim, the Adjudicating Authority must issue a show cause notice if the claim is deemed inadmissible. The failure to follow this procedure was considered a significant flaw in rejecting the refund claim without proper justification.

4. Merits of the Case: The Tribunal examined each ground for denying Cenvat credit. Firstly, it accepted the appellant's explanation regarding the incorrect mention of the supplier/manufacturer name, supported by a certificate from the registered dealer. Secondly, it clarified that the insurance company's reimbursement did not cover the duty paid on the lost goods, hence no reversal of credit was warranted. Lastly, it acknowledged that the appellant was entitled to credit for invoices issued in the name of the head office as the second factory was no longer operational, affirming the appellant's right to claim the credit.

5. Decision and Ruling: After considering the submissions and evidence, the Tribunal ruled in favor of the appellant. It held that the refund claim should be sanctioned as the denial of credit lacked proper procedural adherence and the appellant was entitled to avail Cenvat credit based on the merits of the case. Consequently, the impugned order was set aside, and the refund claim was allowed, leading to the appeal being allowed in favor of the appellant.