2020 (6) TMI 144 - AT - Central Excise

Refund of CENVAT Credit - export of goods - the sole reason for which the refund has been rejected is that the appellant have utilised a substantial part of the credit while the matter was in dispute - HELD THAT - The refund has been rejected arbitrarily and on presumption-assumption basis. The appellant had filed refund claim in the year 2004 and matter was under litigation for long time and it is almost for 16 years now. It would be wrong to expect the assessee to hold on to credit for such a long period. The condition 5 of the aforesaid Notification No. 11/2002-CE (NT) does not mean that the appellant should not be able to utilize the credit at all. It is to be read harmoniously to mean that the refund should be allowed for the manufacturer if the assessee is not in a position to utilize the Cenvat credit within a reasonable period. Refund allowed - appeal allowed - decided in favor of appellant.

Summary

Issues: Denial of refund of Cenvat credit

Analysis:
The appeal was filed against the denial of refund of Cenvat credit by M/s. Koshambh Multitred Private Limited. The appellant, a trader of taxable goods, had opted for Central Excise registration as they were getting goods manufactured from their job workers. A refund claim was filed for a specific amount before the Adjudicating Authority, which was later reduced due to utilization of the credit during the litigation period. The main contention was whether the appellant was entitled to a refund of the remaining balance amount arising from the export of goods, as covered under Rule 5 of Cenvat Credit Rules, 2004.

The Tribunal observed that the refund rejection was solely based on the substantial utilization of credit during the dispute period, assuming further utilization that might have reduced the credit to nil. This observation was deemed baseless and unconvincing as the facts were not verified by the Commissioner (Appeals). The impugned order referred to Condition 5 of the Appendix, which prohibits refund if the credit was continuously utilized without blocking it at the time of filing the refund claim. However, the Tribunal found this rejection arbitrary and presumptive, considering the long duration of the litigation (16 years) and the practical challenges faced by the assessee in holding onto credit for such an extended period.

The Tribunal emphasized that Condition 5 of the Notification No. 11/2002-CE (NT) did not imply that the appellant should not utilize the credit at all. Rather, it should be interpreted to allow a refund if the assessee is unable to utilize the Cenvat credit within a reasonable period. Consequently, the impugned order was set aside, and the appeal was allowed with consequential relief. The decision was pronounced in open court on 05.06.2020.