2019 (1) TMI 819 - AT - Central Excise

Interest on delayed refund - section 11BB of Central Excise Act, 1944 - Refund/restoration of CENVAT credit - Held that - Though availment of CENVAT credit, in accordance with the Rules, does not require any permission, the restoration of reversed credit cannot but be with approval of the competent authority. The procedure under section 11B of Central Excise Act, 1944 is brought into play for this limited purpose of authorizing the restoration. Mere reference in the provisions of law pertaining to refund will not enable such debit entries to be adorned with the mantle of duty. It is amply clear from section 11B of Central Excise Act, 1944 that the provisions were legislated for grant of refund of incorrectly debited entries in the account current. Consequently, the interest liability under section 11BB of Central Excise Act, 1944 will arise only on refund of duty paid by such debits in account current. Further, Central Excise Act, 1944 crystalizes liability of duty on excisable goods whereas liability under rule 6 of CENVAT Credit Rules, 2004 devolves on those that were not excisable. Therefore, the mechanics of erasing of ineligible credit on inputs cannot, by any stretch, constitute duty for appellant to claim the privileges attendant on payment of duty. The provisions of the statute does not offer room for any ambiguity that restoration of credit in the CENVAT credit account must be compensated with interest even if such restoration is ordered beyond three months from the date of claim for such restoration - appeal dismissed - decided against appellant.

Summary

Issues:
Claim for interest on the debited CENVAT credit account.

Analysis:
The appellant, M/s Shri Ambalika Pvt Ltd, had been sanctioned a refund of CENVAT credit along with interest, which had been erroneously debited by them for discharge of liability under rule 6 of CENVAT Credit Rules, 2004. They sought interest under section 11BB of the Central Excise Act, 1944, due to the delayed response in refund sanctioning. The Commissioner of Central Excise & GST (Appeals) allowed interest on the filing of the refund claim, but the rejection of interest on the debited CENVAT credit account is now in appeal before the Tribunal.

The appellant's counsel argued that interest is due on any refund kept pending beyond three months, citing the provisions of section 11BB, and contended that the Explanation in rule 8 of Central Excise Rules, 2002 includes 'amount payable in terms of CENVAT Credit Rules 2004' within the expression 'duty'. Additionally, reliance was placed on a Tribunal decision where interest was ordered to be paid in similar circumstances.

The Authorized Representative opposed, stating that section 11B of the Central Excise Act, 1944 applies only to duty, and interest is not leviable on delayed discharge of liability under rule 6 of CENVAT Credit Rules 2004. It was argued that the CENVAT credit utilized was for services, not inputs, and no prejudice was established due to the temporary withdrawal of credit during the dispute period.

The Tribunal, after considering the submissions, highlighted the distinction between discharge of liability through CENVAT credit and payment of levy through account current. The mechanics of CENVAT credit aim to neutralize tax cascading effects, and the accumulated credit cannot be monetized for business use. The restoration of reversed credit requires approval, and the provisions of section 11B are for authorizing such restoration, not for considering debit entries as duty.

The Tribunal emphasized that interest liability under section 11BB arises only on refund of duty paid by debits in the account current. The absence of restriction in a circular cannot override statutory provisions, and the Tribunal dismissed the appeal, stating that restoration of credit in the CENVAT credit account does not entitle interest compensation beyond three months from the date of claim.

In conclusion, the Tribunal found the appeal without merit and dismissed it, emphasizing that the provisions of the statute do not allow ambiguity regarding interest on restoration of credit in the CENVAT credit account, especially if such restoration is ordered beyond three months from the claim date.