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2024 (6) TMI 1107 - AT - Central ExciseRefund of the Cenvat duty on education cess and secondary higher education cess paid through Cenvat Credit account of BED in terms of the provisions of Notification No. 56/2002-CE dated 14.11.2002 as amended - part rejection of refund on account of education cess and secondary higher education cess paid through Cenvat Credit account of BED - appropriation of amount from sanctioned refund. Rejection of refund on account of education cess and S H education cess - HELD THAT - The appellant is registered in the state of Jammu Kashmir and were availing benefit of area based exemption under N/N. 56/2002-CE dated 14.11.2002. The said notification provides mechanism to give effect to aforesaid exemption by way of refund of duty paid through PLA. As per the procedure, the manufacturer avails Cenvat Credit of duty/cess paid by them on inputs and utilizes whole of the CENVAT credit available with them on last day of the month for payment of Central Excise duty and Cess. The balance amount of duty is paid in cash and on application of refund, the refund is granted for payment of Central Excise made in cash only. The above said issue is no more res-integra and stands finally decided by the decision of the Hon'ble Supreme Court in the case of M/S. UNICORN INDUSTRIES VERSUS UNION OF INDIA OTHERS 2019 (12) TMI 286 - SUPREME COURT , wherein the Hon'ble Apex Court, after considering the provisions of Notification No. 71/2003-CE dated 09.09.2003 has held that a notification has to be issued for providing exemption under the said source of power and that in the absence of notification containing an exemption to such additional duties in the nature of education cess and secondary higher education cess, they cannot be said to have been exempted. Appropriation of an amount of Rs.4,61,315/- - HELD THAT - The impugned order is not sustainable because appropriation cannot be done without issuing any show cause notice and without granting personal hearing to the appellant. This issue was considered by the various benches of this Tribunal in M/S DEPOSIT INSURANCE AND CREDIT GUARANTEE CORPORATION VERSUS COMMISSIONER, CENTRAL EXCISE SERVICE TAX (LTU) , MUMBAI (VICE-VERSA) 2023 (5) TMI 339 - CESTAT MUMBAI - The Tribunal has held that the refund cannot be appropriated when there is no confirmed demand at the time of adjudication and recovery provisions of Central Excise Act are not applicable to service tax. The rejection of refund of Rs.62,842/- on account of education cess and S H education cess is upheld - Appropriation of an amount of Rs.4,61,315/- from the sanctioned refund amount is set aside - appeal allowed in part.
Issues Involved:
1. Rejection of refund claim on account of education cess and secondary & higher education cess. 2. Appropriation of an amount from the sanctioned refund without issuing a show cause notice and without granting personal hearing. Issue-Wise Detailed Analysis: 1. Rejection of Refund Claim on Account of Education Cess and Secondary & Higher Education Cess: The appellant, engaged in manufacturing P & P Medicines and Scrap, filed a refund claim for Cenvat duty paid via PLA under Notification No. 56/2002-CE. The adjudicating authority partially allowed the refund but rejected Rs.62,842/- related to education cess and secondary & higher education cess paid through the Cenvat Credit account of BED for February 2011. The Commissioner (Appeals) upheld this rejection. The Tribunal referenced the Division Bench's decision in Commissioner of C.E., Jammu vs. R.B. Jodhamal & Co. Pvt Ltd, which established that units availing exemption under Notification No. 56/2002-CE cannot use BED Credit for paying education cess and S & H cess, which are not exempt under the notification. This position was further reinforced by the Supreme Court in M/s Unicorn Industries vs. Union of India, which clarified that exemption notifications must explicitly cover all duties, including education cess and secondary & higher education cess, for them to be exempted. The Tribunal concluded that the rejection of the refund claim of Rs.62,842/- was justified and upheld. 2. Appropriation of an Amount from the Sanctioned Refund Without Issuing a Show Cause Notice and Without Granting Personal Hearing: The adjudicating authority appropriated Rs.4,61,315/- from the sanctioned refund without issuing a show cause notice or granting a personal hearing. This amount included Rs.3,71,534/- for irregular Cenvat credit, Rs.87,520/- as interest on irregular Cenvat credit, Rs.755/- as interest on delayed duty payment, and Rs.1,506/- for short payment of education cess and S & H education cess on input reversal. The appellant argued that this appropriation was done without due process and resulted in a double deduction of Rs.3,71,534/-, which had already been reversed in February 2011. The Tribunal agreed, citing multiple precedents where appropriation without a confirmed demand and due process was deemed unsustainable. Cases such as Deposit Insurance and Credit Guarantee Corporation vs. CCE & ST (LTU), Mumbai, and Indian Oil Corporation Ltd vs. CCE, Vadodara, were referenced to support this position. Conclusion: The Tribunal issued the following order: 1. The rejection of the refund claim of Rs.62,842/- on account of education cess and S & H education cess is upheld. 2. The appropriation of Rs.4,61,315/- from the sanctioned refund amount is set aside. The appeal was partially allowed in these terms.
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