2018 (12) TMI 1417 - AT - Central Excise

Suo motu availment and utilisation of CENVAT credit - refusal of rebate claim - Rule 18 of Central Excise Rules read with Notification no. 19/2004-CE.(NT) dated 06.09.2004 - Held that - Admittedly, N/N. 19/2012-CE(NT) dated 06.09.2004 provides for the procedure to be followed in claiming of rebate to central excise authorities or by electronic declaration where no time limit is prescribed. As found from the explanation to Section 11B of the Central Excise Act, refund includes rebate of duty of excise on excisable goods exported out of India and 11(1)(B) restricts such filing of refund before the expiry of one year from the relevant date and relevant date indicates, in the case of appellant, the date of shipment and not the date of payment of duty. Cnsidering the fact that appellant had expressed its intention to the department, requested in writing to follow the procedure by way of recrediting cenvat credit account of the disputed account and did wait for one and half years as well as issued two remainders to the department and thereafter taken suo motu credit, it cannot be said that it had intention to contravene any of the provisions of rule or act for which it shall be penalised. It can be recorded as its erroneous understanding of procedural law by the appellant. Penalty is set aside - rest of demand upheld - appeal allowed in part.

Issues:

1. Suo motu availment and utilization of cenvat credit after refusal of rebate claim.
2. Applicability of Central Excise Rules and Cenvat Credit Rules to the case.
3. Legality of recrediting cenvat account without specific provision.
4. Interpretation of relevant legal provisions and circulars.
5. Imposition of duty liability and penalty.

Issue 1: Suo motu availment and utilization of cenvat credit after refusal of rebate claim

The appellant, a company engaged in manufacturing and exporting goods, had its rebate claim rejected due to being time-barred and not furnishing required documentation. Subsequently, the appellant took suo motu recredit without challenging the rejection. The department communicated that recrediting was not allowed under the Cenvat Credit Rules. The adjudicating authority confirmed duty demand and penalty, leading to the appellant's appeal.

Issue 2: Applicability of Central Excise Rules and Cenvat Credit Rules

The appellant argued that the rules were not applicable as recredit was due to duty paid illegally, and excise duty was not leviable on exported goods. The appellant claimed that rectification of errors did not contravene any law. Reference was made to a CBEC circular emphasizing parity between rebate claims and export goods bond to maintain duty incidence nil.

Issue 3: Legality of recrediting cenvat account without specific provision

The department contended that the appellant had no method to correct the rejection of the rebate claim and that Cenvat Credit Rules did not allow for suo motu credit. The absence of a provision for central excise assessee to take such credit was highlighted. The department supported the Commissioner (Appeals) order and opposed any interference.

Issue 4: Interpretation of relevant legal provisions and circulars

The Tribunal reviewed case records, submissions, and relevant laws, including a judgment on a similar matter. It noted that the appellant did not challenge the rejection of the rebate claim before the appropriate authority. The Tribunal emphasized that there was no express provision allowing the appellant to take suo motu credit, making it beyond the court's jurisdiction to validate such actions.

Issue 5: Imposition of duty liability and penalty

The Tribunal acknowledged the appellant's intention to follow procedures in recrediting the cenvat account and the lack of explicit legal provisions followed by the appellant. It ruled that the penalty imposed under the Central Excise Act and Cenvat Credit Rules could not stand, considering the appellant's erroneous understanding of procedural law. The appeal was allowed in part, setting aside the penalty but confirming the disallowance of cenvat credit with applicable interest.

This judgment delves into the complexities of rebate claims, recrediting cenvat accounts, and the interpretation of legal provisions governing such actions. It underscores the importance of following established procedures and the limitations on taking suo motu credit without explicit provisions. The Tribunal's analysis provides clarity on the legal framework surrounding duty liabilities, penalties, and the consequences of unauthorized recredit actions.

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