2012 (9) TMI 776 - AT - Central Excise

Whether duty debited in RG 23A Part-II could be refunded in cash - duty claimed as refund by the assessee was an amount of duty debited in RG 23A Part-II Held that - Claim of refund by the appellant was of an amount in RG 23A Part-II which remained unutilized and eventually lapsed on 1-4-1999 by reason of switch-over to SSI Exemption Scheme - appellant has not been able to substantiate their claim for refund of the balance amount of credit which was part of the credit which lapsed on 1-4-1999 - refund claim filed in 2007 for this amount of credit which lapsed as early as on 1-4-1999 stands rightly rejected - appeal is dismissed

Summary

Issues:
1. Denial of refund of duty amount by authorities
2. Validity of refund claim due to lapse of credit under Rule 57H(7) of Central Excise Rules, 1944
3. Applicability of SSI Exemption Scheme and its impact on refund claim

Analysis:

1. The appeal was against the denial of a refund of Rs. 4,02,672/- by the authorities. The refund claim was based on unutilized MODVAT credit in the appellant's account frozen due to a shortage of LDPE granules found during stock verification. The dispute culminated in a Tribunal order partly in favor of the appellant, enabling them to take re-credit of the amount. However, the Assistant Commissioner rejected the refund claim, stating that the credit had lapsed under Rule 57H(7) of the Central Excise Rules, 1944, upon opting for the SSI Exemption Scheme. The Commissioner (Appeals) allowed a partial refund of Rs. 2.7 lakhs, with the balance amount held to have lapsed and not allowed as a refund, leading to the current appeal.

2. The appellant had switched to the SSI Exemption Scheme from 1999-2000, as evident from records showing duty payments made in accordance with the scheme. Rule 57H(7) mandates that upon opting for duty exemption under a notification, any credit of duty paid on inputs shall lapse, as in the case of the appellant. The Revenue contended that the credit had lapsed on 1-4-1999, hence rejecting the refund claim. The appellant's argument, citing precedents, including the Tribunal's Larger Bench decision in Gauri Plasticulture (P) Ltd. v. C.C.E., aimed to support their claim for a refund of the balance credit amount.

3. The Tribunal examined the Larger Bench decision cited by the appellant, emphasizing the distinction between duty debited in RG 23A Part-II and unutilized credit that eventually lapsed. While the former could be refunded in cash, the latter, as in the appellant's case, could not be substantiated for a refund post-lapse. The Tribunal upheld the rejection of the refund claim, stating that the unutilized credit had lapsed on 1-4-1999 due to the switch to the SSI Exemption Scheme. Consequently, the appeal was dismissed, affirming the denial of the refund.

This detailed analysis of the judgment highlights the issues, arguments presented, legal provisions invoked, and the Tribunal's reasoning leading to the dismissal of the appeal against the denial of the refund claim.