2006 (2) TMI 48 - AT - Central Excise

Central Excise Cenvat/Modvat Duty paid after availing deemed credit eligible for benefit of the notification Appellant by mistake not availed benefit of notification and paid duty in excess Refund claim not barred by limitation nor there is unjust enrichment

Summary

Issues:
Refund claim rejection based on notification interpretation.

Analysis:
The appeal was against the rejection of a refund claim by the original authority. The appellants, manufacturers of readymade garments, paid duty @ 16% on the garments. The Ministry of Defence deducted Rs. 18,593 from the duty, being deemed credit on the fabric used. The appellants sought a refund of Rs. 18,593, claiming they paid excess duty by mistake. The adjudicating authority rejected the claim, stating no excess duty was paid. The appellate authority upheld this decision. The consultant argued that the benefit of notification was not considered correctly, as the notification allowed deemed credit on fabrics used in manufacturing. The Departmental Representative contended that the duty was correctly paid, and the notification only granted deemed credit.

Upon review, it was established that the appellants were discharging duty liability on the final products. Notification No. 54/2001 granted deemed credit on fabrics used in manufacturing apparels of Chapter 62. The notification allowed manufacturers to avail deemed credit of 20% of the duty payable on the finished products without producing any duty-paying documents. The appellants were eligible for this benefit by showing they were manufacturers of readymade garments discharging duty liability. The benefit could be availed to the extent of 20% of the duty payable, resulting in a net duty of 12.8% instead of 16%. The appellants had paid duty @ 16% instead of 12.8%, leading to a refund claim. Interpreting the notification narrowly, as done by lower authorities, would defeat the purpose of granting deemed credit. The absence of Cenvat procedures in the notification indicated that total duty payable should be calculated after availing the deemed credit. The appellants had mistakenly not availed the benefit and paid excess duty, justifying the refund claim.

The order-in-appeal was deemed improper and illegal, thus set aside, allowing the appeal with consequential relief.