2024 (2) TMI 958 - AT - Central Excise

Recovery of of erroneously availed refund under Section 11A of the Central Excise Act 1944 along with interest under Section 11AB of the Act and also imposed equivalent penalty under Section 11AC of the Act - failure to comply with the substantive condition of N/N. 56/2002-CE dated 14.11.2002 requiring utilization of available credit before payment of duty from the PLA - appellant have received certain inputs by virtue of which Cenvat Credit was available to them was never disclosed to the department till its detection by the department - suppression of facts with intent to avail exemption by way of irregular refund - time limitation. Whether the ground on which the refund has been denied is legally sustainable or not? - HELD THAT - The appellant have in fact complied with the conditions of the Notification No. 56/2002-CE dated 14.11.2002 and in terms of conditions of the Notification the appellant had utilized the entire amount of Cenvat Credit lying in their Cenvat Credit account and thereafter balance amount was paid through PLA and accordingly claimed the refund of such amount of the duty. Further it is seen that the appellant have not availed the Cenvat Credit on furnace oil under bonafide belief that the same is not available but the learned Commissioner has drawn the conclusion that the Cenvat Credit was not availed with intention to claim excess refund. The learned Commissioner failed to appreciate that had there been the balance in their Cenvat Credit account the appellant could not have paid the duty through PLA. The learned Commissioner has also wrongly interpreted the meaning of the expression Cenvat Credit available to the appellant on the last day of month used in the Notification No. 56/2002-CE. In this regard it is to be noted that when the manufacturer receive the inputs/capital goods subject to fulfillment of other conditions the Cenvat Credit pertain to the said inputs/capital goods would accrue to them but would not automatically be available in the Cenvat Register but when the manufacturer took the Cenvat Credit in the Cenvat Register at that time it can be said that the credit is available to the appellant. It is pertinent to mention that para 1A of the said Notification provides the utilization of Cenvat Credit which comes into existence only after making entry in the Cenvat Credit account and till that time it is not a Cenvat Credit. Further the refund sanctioning authority also examined the Cenvat Credit account before sanctioning the refund and the refund will only be sanctioned of the duty paid in cash/through PLA after utilization of Cenvat Credit for the relevant month as per the condition of the Notification. It is the common practice that self credit /refund claimed on duty paid in cash/through PLA is allowed after considering the balance of Cenvat Credit available/lying in the Cenvat Register on the last day of the month. It is further found that in the present case it is not the stand of the Department that it has sanctioned/approved refund of duty which was not paid by the appellant but this is the case in which the Department has sanctioned refund equal to the amount which was paid by the appellant in cash or through PLA therefore it cannot be said that this is a case of excess availment of refund by not complying with the condition of the said Notification. Time Limitation - Suppression of facts or not - HELD THAT - It cannot be understood that how in the facts of the present case suppression can be alleged. If the appellant could have availed Cenvat Credit on inputs i.e. furnace oil then they would not have paid more duty in cash and would have claimed refund of lesser amount whereas in fact in this case the appellant have paid the duty in cash/through PLA and thereafter claimed refund and hence entire transaction is revenue neutral and therefore extended period is not invokable in the present case. Accordingly the demand is barred by limitation. The impugned order is not sustainable in law and same is set aside - appeal allowed.

Summary

Issues Involved:
1. Erroneously availed refund under Section 11A of the Central Excise Act, 1944.
2. Non-availment of Cenvat Credit on furnace oil and its implications.
3. Compliance with Notification No. 56/2002-CE dated 14.11.2002.
4. Allegations of suppression of facts and invocation of extended period of limitation.

Summary:

1. Erroneously availed refund under Section 11A of the Central Excise Act, 1944:
The Commissioner confirmed the demand of Rs.41,71,424/- of erroneously availed refund along with interest under Section 11AB and imposed an equivalent penalty under Section 11AC. The appellant argued that the impugned order was unsustainable as it did not properly appreciate the facts and law. They contended that they did not avail Cenvat Credit on furnace oil under a bonafide belief and that the entire transaction was revenue neutral.

2. Non-availment of Cenvat Credit on furnace oil and its implications:
The appellant did not avail Cenvat Credit on furnace oil amounting to Rs.45,72,156/- during the period from April 2005 to March 2009. The Department alleged that this non-availment resulted in excess payment of duty through PLA and consequently excess erroneous refund. The Commissioner dropped the demand under Rule 14 of the Cenvat Credit Rules, 2004, agreeing that there was no time limit for availing Cenvat Credit.

3. Compliance with Notification No. 56/2002-CE dated 14.11.2002:
The appellant was required to utilize the whole of the Cenvat Credit available on the last day of the month before paying duty through PLA. The Department argued that the appellant failed to comply with this condition, constituting suppression with intent to avail irregular refund. The Tribunal found that the appellant complied with the conditions of the Notification, utilizing the entire amount of Cenvat Credit lying in their account before paying the balance through PLA.

4. Allegations of suppression of facts and invocation of extended period of limitation:
The show cause notice was issued on 28.10.2010 for the period from November 2005 to March 2009, alleging suppression of facts. The appellant argued that suppression must be coupled with intent to evade duty, which was not proven. The Tribunal held that the transaction was revenue neutral and the extended period was not invokable, making the demand barred by limitation.

Conclusion:
The Tribunal set aside the impugned order, allowing the appeal with consequential relief, if any, as per law. The demand was found to be barred by limitation, and the appellant was deemed to have complied with the conditions of the Notification No. 56/2002-CE. The entire transaction was considered revenue neutral, negating the allegations of suppression and intent to claim excess refund.