2007 (10) TMI 166 - AT - Central Excise

Refund in view of not. No. 2 appellants were required to pay 50% of the duty liability from the PLA Account and 50% from the Cenvat account - they could pay only 45% of the aggregate duty from the Cenvat account and to compensate for the shortfall of 5%, they debited 55% from the PLA - In terms of the Notification, for deemed credit, the appellant was actually entitled for 50% of the aggregate of duty of excise leviable on the final products It is purely a mistake refund admissible

Summary

Issues:
Appeal against Order of Commissioner of Customs & Central Excise - Deemed credit entitlement under Notification No. 2 (N.T.), dated 11-6-2001 - Refund claim rejection - Utilization of duty credit in Cenvat account - Excess duty payment from PLA Account.

Analysis:
The appeal was filed against the Order No. 201/2004 passed by the Commissioner of Customs & Central Excise (Appeals-II) Hyderabad. The appellants, manufacturers of excisable man-made fabrics, were entitled to deemed credit for their inputs under Notification No. 2 (N.T.), dated 11-6-2001. They were supposed to receive a credit of 50% but mistakenly only took 45% credit during the relevant period. Consequently, they paid duty at 55% from their PLA account while the remaining 45% was paid from their Cenvat account based on deemed credit availed. The lower authority rejected their refund claim, asserting that the duty credit of 45% utilized from Cenvat account neutralized the shortfall. The Commissioner (Appeals) upheld this decision.

During the hearing, it was highlighted that as per the Notification, the appellants were required to pay 50% of the duty liability from the PLA Account and 50% from the Cenvat account. Due to their underutilization of credit, they could only pay 45% from the Cenvat account, resulting in an excess payment of duty from the PLA Account amounting to Rs. 2,77,839. The Tribunal observed that the appellants were actually entitled to 50% credit as per the Notification, and the excess payment was a mistake on their part. Therefore, it was concluded that the appellants had indeed overpaid duty and were eligible for a refund. The Tribunal allowed the appeal, directing for consequential relief if necessary.

In conclusion, the Tribunal found that the appellants had mistakenly underutilized their deemed credit entitlement, leading to an excess payment of duty from their PLA Account. The lower authorities failed to recognize this error and rejected the refund claim unjustly. By interpreting the Notification provisions correctly, the Tribunal ruled in favor of the appellants, acknowledging their right to a refund for the excess duty paid.