2006 (8) TMI 225 - AT - Central Excise

Refund - Cenvat/Modvat - Interpretation of statutes - whether duty debited in RG. 23A Part-II, can be refunded in cash, when the refund becomes otherwise due ? - HELD THAT - We find that the debit entry in credit account was made by the appellants on 23-11-2000, the Central Excise registration was surrendered by them in September 2000, i.e. before making of debit entry in RG-23 account. As such, even if the amounts towards duty would not have been debited by them in the said account, the same would have been remained unutilized. As such, on the success of their appeal before the Commissioner (Appeals), they cannot claim the refund of the same in cash, inasmuch as on account of such debit entry, they have not discharged any duty out of PLA. If the said refund is granted to the appellants by way of cash, the same would amount to making him unjustifiable enrich. It is well settled principles of law that what cannot be done directly should not be allowed to be done indirectly. On surrendering of their licence, the appellants was not allowed to claim the refund of the unutilized credit in the Modvat account, the same would have lapsed. As such, utilization of the same towards payment of disputed demand of duty, after surrendering of their registration, has not led to a situation where the assessee was compelled not to use the credit for regular clearances and had to make payment from PLA. As such, in this case we find that the refund in cash is not to be allowed. The appeal papers are returned to the original referral Bench for disposal of appeal.

Summary

Issues:
1. Whether duty debited in RG. 23A Part-II can be refunded in cash when the refund becomes due.
2. Refund of duty paid out of PLA due to denial of credit.

Analysis:
1. The Tribunal referred the issue of refunding duty debited in RG. 23A Part-II to the Larger Bench due to divergent views in various decisions. The Tribunal considered cases like DCM Data Products and National Organic Chemicals Industries Ltd. where refunds were granted in cash due to delays or objections by the revenue department. Various judgments were cited to support the refund in cash, emphasizing equity and justice. The Tribunal held that if the denial of credit forced the assessee to pay duty out of PLA, cash refund would be allowed to the extent of cash payments made during the relevant period.

2. The Tribunal discussed cases like Sandoz (India) Ltd., CCE v. Bombay Burmah Trading Corporation Ltd., and Allampally Brothers Ltd., where refunds were allowed in cash due to specific circumstances such as factory closure or inability to utilize credits. The Tribunal noted that if the credit remained unutilized and no cash payments were made through PLA, cash refund would not be allowed to prevent unjust enrichment. The Tribunal applied these principles to the case at hand, where the appellants surrendered their registration before debiting duty in the RG-23 account, leading to the conclusion that cash refund was not warranted in this scenario.

In conclusion, the Tribunal emphasized the principles of equity and justice in granting cash refunds for duties paid out of PLA due to denial of credit. The decision was based on the specific circumstances of each case, ensuring that cash refunds were only allowed where necessary to prevent unjust enrichment. The appeal papers were returned to the referral Bench for further proceedings.