2020 (3) TMI 451 - AT - Central Excise

Refund of CENVAT Credit reversed - effect of amendment made vide notification no. 06/2015 dated 01/03/2015, prospective or retrospective effect? - Rule 6(4) of the Cenvat Credit Rules - HELD THAT - The appellants were availing small scale exemption at the time when the capital goods were received in their factory in the year 2012-13. The appellant took registration in the year 2017. At the time of receipt of goods, there was no restriction on time for availing Cenvat credit on capital goods received in the factory. The said time limit was introduced by amendment by N/N. 06/2015 dated 01/03/2015 - The decision in the case of BHARAT RESINS LTD. VERSUS C.C.E. S.T. SURAT-I 2019 (9) TMI 701 - CESTAT AHMEDABAD squarely covers this issue and held that the time limit introduced for availing Cenvat Credit on capital goods by the notification no. 06/2015 only has prospective effect and cannot be applied to the said amendment. In these circumstances, the appellant becomes eligible to avail the Cenvat credit on the capital goods without any restriction of the time limit imposed by notification no. 06/2015 dated 01/03/2015. Another point argued by the Revenue is that at the time when the Capital goods were received, the appellants were not entitled to avail the Cenvat Credit as the goods manufactured by them were fully exempt - HELD THAT - It is seen that the appellants at the material time were claiming full exemption by virtue of notification and granted exemption on the basis of the value of clearances made during the Financial year - In the case of Nova Plasmold Pvt. Ltd. 2017 (7) TMI 1121 - CESTAT ALLAHABAD , it has been held that in view of Rule 6(4) of Cenvat Credit Rules, the restriction on availment of Cenvat Credit does not apply if the goods are exempted by virtue of notification which grants all exemption on the basis of the clearance made during any financial year - In these circumstances, the appellant becomes eligible for Cenvat Credit. However, it is seen that the appellants have voluntarily reversed the Cenvat Credit and now are seeking the refund. There is no provision for granting refund of any Cenvat credit voluntarily reversed by the appellant - Refund of any credit can only be granted when it is sanctioned by law and there are specific provisions for it. There is no provision for sanctioning of refund against reversal of credit in the present circumstances and thus, while the appellants may be entitled to Cenvat credit and may have wrongly reversed the Cenvat Credit, they cannot claim refund of the same. Appeal dismissed - decided against appellant.

Summary

Issues:
Refund claim rejection based on Cenvat credit eligibility for a partnership firm availing small scale exemption. Interpretation of notification no. 06/2015 dated 01/03/2015 on availing Cenvat credit on capital goods. Eligibility for Cenvat credit when goods are fully exempted. Claiming refund for voluntarily reversed Cenvat credit.

Analysis:

1. Refund Claim Rejection - Cenvat Credit Eligibility:
The appeal involved M/s Friends Fortis, a partnership firm, seeking a refund claim rejection. The firm obtained registration in 2017 after seeking an opinion on Cenvat credit eligibility for imported machinery in 2012-2013. Despite not claiming depreciation since 2012-2013, they reversed the credit in 2017 intending to litigate but later filed a refund claim. The Tribunal's decisions in various cases supported the firm's claim that registration was not a precondition for availing credit, especially when fully exempted under Rule 6(4) of the Cenvat Credit Rules.

2. Interpretation of Notification on Cenvat Credit:
The key issue was the interpretation of notification no. 06/2015 dated 01/03/2015 regarding the time limit for availing Cenvat credit on capital goods. The Tribunal held that the time limit introduced by this notification had prospective effect only, as per decisions in Bharat Resins Ltd. and Sicgil Industrial Gases Ltd. cases. Therefore, the firm was deemed eligible to avail Cenvat credit without the restriction imposed by the notification.

3. Eligibility for Cenvat Credit on Fully Exempted Goods:
Another contention was whether the firm was entitled to Cenvat credit when goods were fully exempted. The Tribunal referred to the case of Nova Plasmold Pvt. Ltd., stating that the restriction on credit does not apply if goods are exempted under a notification granting full exemption based on annual clearances. Consequently, the firm was considered eligible for Cenvat credit under these circumstances.

4. Claiming Refund for Voluntarily Reversed Cenvat Credit:
The final issue revolved around the firm voluntarily reversing the Cenvat credit and seeking a refund. The Tribunal emphasized that there was no provision for refunding voluntarily reversed credit. Citing the case of Prerna Cables Pvt. Ltd., the Tribunal clarified that the firm needed to re-avail the credit if wrongly reversed, rather than claim a refund. Refund of credit can only be granted as per specific provisions, and the reversal of credit cannot be used as a tool to encash it, as it would defeat the purpose of the Cenvat Credit scheme.

In conclusion, the Tribunal dismissed the appeal, emphasizing that while the firm may be entitled to Cenvat credit and had wrongly reversed it, there was no legal provision for refunding reversed credit. The decision was based on the principles of the Cenvat Credit scheme and the lack of specific provisions for refund in such circumstances.