2007 (10) TMI 155 - AT - Central Excise

Untimely action to deny inadmissible credit in earlier proceedings refund was allowed as not barred by unjust enrichment or limitation if proceedings in first round had reached finality then same could not be re-opened to deny refund or raise interest

Issues Involved:
1. Eligibility of refund claim for duty paid from Modvat credit.
2. Applicability of unjust enrichment and limitation on the refund claim.
3. Entitlement to interest on delayed refund.

Detailed Analysis:

1. Eligibility of Refund Claim for Duty Paid from Modvat Credit:
The assessee, M/s Flow Tech Power (FTP), manufactured and cleared plastic articles for Drip/Sprinkler Irrigation System (SIS) claiming exemption under Notification No.46/94-CE and later Notification No.56/95. The department initially denied the exemption, treating the goods as plastic pipes/tubes, leading FTP to pay duty under protest. The Tribunal eventually ruled in favor of FTP, recognizing the goods under the said notifications. FTP then claimed a refund of Rs.64,72,809/- from RG23A and Rs.25,58,995/- from PLA. The Assistant Commissioner rejected the refund claim citing unjust enrichment and limitation, which was overturned by the Commissioner (Appeals) and later upheld by the Tribunal and the Madras High Court.

However, a subsequent Show Cause Notice (SCN) proposed rejecting the refund claim for the amount paid from Modvat credit, arguing that FTP was not eligible for the credit taken as the final products were exempt. The Commissioner (Appeals) upheld this rejection based on Rule 57C, which mandates reversing credit when the final product is exempt. FTP appealed, arguing that the admissibility of the entire refund claim had been settled by earlier orders, and no proceedings had been initiated earlier to deny the credit on the grounds of Rule 57C.

2. Applicability of Unjust Enrichment and Limitation on the Refund Claim:
The Tribunal and the High Court had previously determined that the refund claim did not suffer from unjust enrichment or limitation. The department had accepted these decisions, and no further proceedings were initiated within the stipulated time to disallow the credit taken. The Tribunal noted that the rejection of the refund claim for utilized Modvat credit amounts to disallowing the credit initially taken as irregular if the refund was admissible otherwise. The department had not issued a notice invoking Rule 57C within six months of the Tribunal's decision in 2000, which declared FTP's final products exempt from duty.

3. Entitlement to Interest on Delayed Refund:
FTP claimed interest on the entire refund amount for the period of delay beyond three months from the date of the initial claim. The Commissioner (Appeals) had sanctioned interest only on the amount paid from PLA, citing Section 11BB of the Central Excise Act. The Tribunal found that the appellant was eligible for interest on the entire refund amount, including the amount paid from Modvat credit, from the date of expiry of three months from the date of application till the date of payment. This was supported by several decisions of the Tribunal, which established that interest is payable from the date of the refund claim if the refund is delayed.

Conclusion:
The Tribunal allowed FTP's appeal, granting the refund of Rs.64,72,809/- paid from RG23A and interest on the entire refund amount for the period of delay. The Tribunal emphasized that the department's failure to timely disallow the credit under Rule 57C barred them from reopening the issue after the refund claim had reached finality. The Tribunal's decision was based on the principle that once an issue had attained finality, the department could not take a different stand, as supported by various judicial precedents.

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