2005 (10) TMI 195 - AT - Central Excise

Issues Involved:
1. Eligibility of the appellant to claim set-off credit under Notification No. 225/86.
2. Applicability of Rule 57H(3) for the transfer of set-off credit.
3. Compliance with procedural requirements, including submission of RG 23 Part-I.
4. Applicability of the principle of unjust enrichment.
5. Entitlement to transfer of credit versus cash refund.

Detailed Analysis:

1. Eligibility of the Appellant to Claim Set-Off Credit under Notification No. 225/86:
The appellant, a manufacturer of Acrylonitrile (ACN) and Acrylic fibre, initially availed the benefit of Notification 40/85, which exempted ACN if consumed within the factory. Later, they opted for Notification 225/86, which exempts Acrylic fibre duty in excess of the duty paid on ACN. The Assistant Commissioner permitted this change. The appellant paid duty on ACN and took set-off credit in RG 23 Part II, using it to pay duty on Acrylic fibre. However, the Range-I Superintendent objected and directed the appellant not to avail the set-off benefit under Notification 225/86, leading to the appellant stopping duty payments on ACN and seeking a refund of the balance credit.

2. Applicability of Rule 57H(3) for the Transfer of Set-Off Credit:
The Tribunal's remand order required examining the eligibility of the appellant's claim under Rule 57H(3). The Commissioner (Appeals) concluded that Notification 225/86 does not provide for credit of duty paid on inputs but allows a set-off of duty on finished goods. The Tribunal in the case of M/s. GTC distinguished between notifications allowing credit and those providing duty exemption/reduction. The appellant's claim under Rule 57H(3) was found inadmissible as the notification did not fall within the ambit of credit-allowing notifications.

3. Compliance with Procedural Requirements, Including Submission of RG 23 Part-I:
The rejection of the refund claim was partly based on the appellant's failure to submit RG 23 Part-I for verification. However, the Tribunal noted that the RG 23 Part-I should be in the possession of the department under the physical control system. The Tribunal found the rejection on these procedural grounds unjustified, especially since the RG 23 Part-I was submitted in the paper book.

4. Applicability of the Principle of Unjust Enrichment:
The Commissioner (Appeals) and the adjudicating authority applied the principle of unjust enrichment, citing the Supreme Court's decision in Solar Pesticides, which states that even if the duty incidence is passed indirectly, the refund should be transferred to the Consumer Welfare Fund. The appellant failed to prove that the duty incidence was not passed on. However, the Tribunal referenced the Supreme Court's decision in Dai Ichi Karkaria, which held that duty paid on inputs used in final products should be credited, not refunded. Therefore, the findings on unjust enrichment were not upheld.

5. Entitlement to Transfer of Credit Versus Cash Refund:
The Tribunal found that the appellant was entitled to transfer the set-off credit to their Modvat/Cenvat account, not a cash refund. The rejection of the refund claim was upheld, but the plea for eligibility to transfer the credit was granted. The Tribunal directed the appellant to take the credit of Rs. 1,20,90,750/- in the RG 23A Modvat/Cenvat Register and utilize it for payment of duty on eligible final products.

Conclusion:
The Tribunal allowed the appeal, setting aside the order of the Commissioner (Appeals). The appellant was directed to take the credit of Rs. 1,20,90,750/- in the RG 23A Modvat/Cenvat Register and utilize it for payment of duty on eligible final products. The rejection of the refund claim was upheld, but the eligibility for the transfer of credit was granted.

Ordered Accordingly:
The appeal was allowed in the above terms and pronounced in Court on 25-10-2005.

← Previous Next →