1995 (11) TMI 158 - AT - Central Excise

Summary

Issues:
1. Refund claim rejection by Assistant Collector based on Modvat Credit utilization.
2. Appeal against rejection of refund claim by Collector of Central Excise (Appeals).
3. Applicability of extended period for demand.
4. Entitlement to refund and undue enrichment.

Analysis:

1. The appeal was filed by the Collector of Central Excise, Chandigarh against the Order-in-Appeal that set aside the rejection of a refund claim by M/s. Kumar Auto Cast Limited. The Assistant Collector rejected the claim due to the utilization of Modvat Credit for duty payment on an undeclared final product, MCI inserts. The respondents debited the duty amount from their PLA and later sought a refund, arguing that the demand for disallowing Modvat Credit was time-barred. The Assistant Collector rejected the refund claim, stating that the duty utilization was recoverable, and the refund claim based on a mistake of law was not valid. However, the Collector of Central Excise (Appeals) overturned this decision, emphasizing that the demand should have been issued within six months and there was no suppression of facts by the appellants.

2. The appeal argued that the Collector (Appeals) erred in applying the extended period for the demand and that the respondents should have appealed against the duty demand or debited the amount under protest. It was contended that seeking a refund for wrongly availed credit would lead to undue enrichment, prohibited under Section 11B of the Central Excises and Salt Act. The appellant urged to restore the Assistant Collector's order by setting aside the Order-in-Appeal.

3. During the appeal hearing, the respondents were absent despite notice issuance. The Departmental Representative proceeded with the hearing and supported the grounds raised in the appeal. The Member (Tribunal) considered the submissions and records, concurring with the argument that the refund claim should not have been allowed based on the time-barred demand. Although the demand was technically time-barred, once accepted and paid by the respondents, the time limitation became irrelevant. The rejection of the refund claim by the Assistant Collector was upheld as the admissibility depended on the entitlement to pay duty on the undeclared final product using Modvat Credit, which was not permissible.

4. The decision to set aside the Order-in-Appeal and restore the Assistant Collector's order did not preclude the respondents from rectifying the wrongly availed Modvat Credit. The respondents were entitled to credit the amount to their RG-23A Part II account, which could be utilized for duty payment as per Modvat Rules. The argument of undue enrichment was dismissed, citing an exception under Section 11B for refund related to duty credit. As no refund was deemed admissible, Section 11B(2) was not applicable in this case.