2018 (8) TMI 307 - AT - Central Excise

Refund claim - reversal of CENVAT Credit was made, which was not required - Held that - Admittedly the amount reversed by the appellant was not required to be reversed, therefore, they filed refund claim which is correct, in these circumstances, appellant is entitled to claim refund of ₹ 3,88,550/- - the appellant is not liable to pay any interest and no penalty can be imposed on the appellant. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Refund denial by authorities below; Regularization of Cenvat credit; Denial of refund claim by Commissioner (Appeal); Applicability of Flock (India) Pvt. Ltd. decision.

Analysis:
The appellant appealed against the rejection of a refund amounting to ?3,88,550 by the lower authorities. The case involved the transfer of input work in progress and capital goods from an entity initially known as Nick Auto Industries to Nick Auto Industries Pvt. Ltd. The appellant sought to regularize Cenvat credit amounting to ?5,66,983. During an audit, it was discovered that there was a Cenvat credit balance of ?9,55,533 as of 31.03.2008. The appellant was directed to reverse ?3,88,550, which they did on 14.05.2012. Subsequently, realizing the reversal was unnecessary, the appellant filed a refund claim on 10.07.2012. A show cause notice was issued, leading to the denial of the refund claim, demand for interest, and imposition of a penalty. The Commissioner (Appeal) upheld the denial, citing the Flock (India) Pvt. Ltd. decision.

Upon review, it was found that the appellant had applied for regularization of Cenvat credit for the transfer of ?5,66,983, which was approved on 17.09.2010. The appellant contended that as of the transfer date to the Pvt. Ltd. Company on 01.05.2008, the Cenvat credit balance was only ?5,66,983. The authorities misunderstood that the balance as of 31.03.2008 needed to be transferred, whereas the transfer occurred in May 2008. As there was no order rejecting the transfer of ?3,88,550, the Flock (India) Pvt. Ltd. decision was deemed inapplicable.

The appellate tribunal ruled in favor of the appellant, acknowledging that the reversed amount was not required to be reversed. Consequently, the appellant was deemed entitled to claim the refund of ?3,88,550. Notably, no interest was to be paid by the appellant, and no penalty could be imposed. The appeal was allowed, granting the refund to the appellant.