2007 (11) TMI 202 - AT - Central Excise

Availed credit on Furnace Oil, which is used as fuel for generation of electricity reversed the credit on advice of audit team - After a year, they realized that the credit reversed was not in order so they re-credited the amount credit denied by revenue on ground that assessee didn t take permission before re-credit held that no permission is needed for re-credit in respect of wrong reversal moreover credit was reversed, only on erroneous advice given by audit officers

Summary

Issues:
Appeal against order passed by Commissioner of Central Excise on Cenvat credit reversal and re-credit entitlement.

Analysis:
The appeal was filed against an order passed by the Commissioner of Central Excise regarding the reversal and re-credit of Cenvat credit on Furnace Oil used in the manufacture of exempted products. The appellants initially reversed the credit based on advice from the Audit team but later realized the reversal was incorrect and informed the Department of their intention to re-credit the amount. The Department contended that re-credit was impermissible without permission and demanded the amount of Cenvat credit taken by the appellant. The Commissioner (Appeals) upheld the original authority's decision, stating that the appellants could only claim a refund in the normal course. The appellant argued that there was no dispute regarding their entitlement to the credit and cited relevant case law supporting their position that no permission was required for re-credit of wrongly reversed amounts.

The Departmental Representative argued that once the credit was reversed, there was no provision for suo motu re-credit, and the proper course would be to file a refund claim. She relied on a Tribunal decision stating that there was no provision for the restoration of credit reversed earlier, and appellants must follow the prescribed procedure under Section 11B. After careful consideration, the Tribunal found that the appellants reversed the credit based on incorrect advice from the Audit team and later sought to re-credit the amount upon realizing the mistake. The Tribunal noted that relevant case law supported the appellants' position that no permission was required for re-credit in such cases. Additionally, since there was no dispute regarding the appellants' entitlement to the credit, the Tribunal deemed it unjust to deny the credit based on the erroneous advice given by the Audit team. Therefore, the Tribunal allowed the appeal, providing the appellants with consequential relief.

In conclusion, the Tribunal ruled in favor of the appellant, allowing the appeal against the Commissioner of Central Excise's order. The Tribunal held that the appellants were entitled to re-credit the Cenvat credit amount that was wrongly reversed, emphasizing that no permission was required for such re-credit in the absence of a dispute regarding entitlement. The Tribunal criticized the erroneous advice given by the Audit team and found no justification for the Revenue's demand for the amount of credit taken by the appellants, ultimately granting relief to the appellants.