2025 (1) TMI 673 - AT - Central Excise

Recovery of sanctioned refund that was granted to the Respondent under the CENVAT Credit Rules - HELD THAT - It is an admitted fact that the Respondent was holding CENVAT credit in their account at the relevant time and as per Section 5 of the CENVAT Credit Rules, if any input is used in manufacture of final product, which is cleared for export under Bond or letter of undertaking, the CENVAT Credit in respect of such input shall be allowed to be utilized by the manufacturer towards payment of duty of excise on any final product cleared for home consumption and where for any reason such adjustment is not possible, the manufacturer shall be allowed refund of such amount subject to such safe guards, conditions and limitations as prescribed in the relevant notification. The Respondent had applied for refund of unutilized CENVAT credit amounting to Rs.1,23,04,382/- and Adjudication authority as per the order dated 16.06.2009 sanctioned only Rs. 88,37,166/- though the Appellant admits that the CENVAT credit available against the goods exported during the same period was Rs. 1,23,04,383/-. Conclusion - The entire proceedings initiated against the Respondent are unsustainable. Refund is allowed. Appeal of Revenue dismissed.

1. ISSUES PRESENTED and CONSIDERED

The core legal question in this appeal is whether the Appellant (Revenue) can recover the sanctioned refund amount of Rs. 88,37,167/- that was granted to the Respondent under the CENVAT Credit Rules.

2. ISSUE-WISE DETAILED ANALYSIS

Issue: Recovery of Sanctioned Refund Amount

Relevant Legal Framework and Precedents:

The legal framework primarily involves the CENVAT Credit Rules and the Central Excise Act, 1944. Specifically, Section 5 of the CENVAT Credit Rules allows a manufacturer to utilize CENVAT credit for the payment of excise duty on final products cleared for home consumption or to claim a refund if such adjustment is not possible. The Notification No. 5/2006 CE (NT) dated 14.03.2006 outlines the conditions for such refunds.

Precedents cited include decisions from the Tribunal in M/s. Tri Dos Laboratories Ltd Vs. CCE and High Court decisions in M/s. Dynamic Technologies Ltd Vs. Union of India and M/s Honda SIEL Power Products Vs. Union of India, which emphasize that recovery of refunds can only be made upon modification of the Order-in-Appeal and not through protective show cause notices or invoking Section 11A for erroneous refunds.

Court's Interpretation and Reasoning:

The Tribunal noted that the Respondent had utilized CENVAT credit amounting to Rs. 4,02,70,471/- for clearance of finished goods for home consumption, while the refund claim for exports was Rs. 1,23,04,383/-. The Appellant's argument was that the Respondent did not meet the conditions of the relevant notification, making the refund improper. However, the Tribunal found that the Respondent held CENVAT credit at the relevant time and was entitled to a refund as per the rules, given that the credit was unutilized.

Key Evidence and Findings:

The Tribunal acknowledged that the Respondent had CENVAT credit available and had applied for a refund of the unutilized amount. The Adjudication authority had sanctioned Rs. 88,37,166/- despite the available credit for exports being Rs. 1,23,04,383/-. This discrepancy formed the basis of the Revenue's appeal.

Application of Law to Facts:

The Tribunal applied Section 5 of the CENVAT Credit Rules, confirming that the Respondent was entitled to a refund of the unutilized credit. The Tribunal emphasized that the proceedings initiated by the Revenue were unsustainable given the legal provisions and the precedents set by higher judicial authorities.

Treatment of Competing Arguments:

The Tribunal considered the Revenue's argument that the conditions of the notification were not met. However, it found the Respondent's reliance on prior decisions and legal provisions more persuasive. The Tribunal noted that the Revenue's appeal was untenable, especially since the Commissioner (Appeals) had already dismissed similar grounds and the decision had been accepted in review.

Conclusions:

The Tribunal concluded that the Revenue's appeal was unsustainable and dismissed it, upholding the refund sanctioned to the Respondent.

3. SIGNIFICANT HOLDINGS

Verbatim Quotes of Crucial Legal Reasoning:

"We find that it is an admitted fact that the Respondent was holding CENVAT credit in their account at the relevant time... the entire proceedings initiated against the Respondent are unsustainable."

Core Principles Established:

The Tribunal reinforced the principle that recovery of refunds can only occur through modification of the Order-in-Appeal, not through protective show cause notices or invoking Section 11A for erroneous refunds. It also emphasized the adherence to CENVAT Credit Rules for refund claims.

Final Determinations on Each Issue:

The Tribunal determined that the appeal by the Revenue lacked merit and dismissed it, affirming the Respondent's entitlement to the sanctioned refund amount of Rs. 88,37,167/-.

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