2017 (12) TMI 322 - AT - Central Excise

Refund/re-credit of amount debited by appellant - amount debited for pre-deposit of penalty, which does not sustain - Held that - there is no dispute that ₹ 4,40,000/- were debited on 31.01.2003 through Entry No. 1921 by the appellant. Said debit was not for payment of any duty of Excise or Service Tax. Further, the said debit was not for reversal of credit for removal of any inputs or capital goods - the appellant is entitled for re-credit of the said debit - appeal allowed - decided in favor of appellant.

Summary

Issues:
Refund of penalty amount debited from Cenvat Account through Entry No.1921 dated 31.01.2003.

Analysis:
The appeal was directed against an Order-in-Appeal passed by the Commissioner (Appeals) Central Excise, Customs, and Service Tax. The appellant had submitted an application for a refund of amounts deposited as pre-deposit, which was decided through an Order-in-Original. The Original Authority sanctioned the refund of certain amounts towards interest and penalty but rejected the refund of a specific penalty amount of &8377; 4,40,000. The appellant contended that the penalty amount was debited from the Cenvat Account through Entry No.1921 dated 31.01.2003, and since it was undisputed that the appellant had debited Cenvat Credit for the said amount, the Revenue could not hold the amount debited unlawfully. The Commissioner (Appeals) rejected the refund stating that there was no provision for the refund of penalty amount paid unlawfully through Cenvat. The appellant then approached the Tribunal.

The appellant argued that when the penalty amount was debited in 2003, the Revenue did not object, and since the penalty did not sustain in subsequent proceedings, the Revenue had no authority to retain the amount, making the refund their legal right. On the other hand, the learned Authorized Representative for the Respondent contended that under Rule 3(3) of Cenvat Credit Rules, 2004, Cenvat Credit could only be utilized for specific purposes like payment of duty of Excise or Service Tax, and not for payment of penalty.

After considering the arguments, the Tribunal found that the amount of &8377; 4,40,000 was debited from the Cenvat Account on 31.01.2003 through Entry No. 1921 by the appellant, which was not for payment of duty or reversal of credit for clearances of inputs or capital goods. As a result, the Tribunal held that the appellant was entitled to re-credit of the said amount. Therefore, the Tribunal allowed the appeal and directed the re-credit of &8377; 4,40,000 to the Cenvat Account maintained by the appellant against the debit Entry No. 1921 dated 31.01.2003.