2014 (5) TMI 947 - AT - Central Excise

MODVAT credit - Clearance of the ingots cut end pieces to their sister unit for converting them into ingots by melting without payment of duty under Rule 57F(3) of the erstwhile Rules, 1944 - Assessee revered CENVAT Credit later - Commissioner allowed assessee s appeal - Refund claim - Unjust enrichment - Held that - The appellant paid the said amount through the CENVAT account for the purpose of filing appeal before the Commissioner (Appeals). It is seen that there are several rounds of litigation on merit as well as on refund claim. Ultimately, the adjudicating authority sanctioned the refund claim and as the appellant s factory was already closed, it was directed to pay in cash and the amount has already been paid to them in cash. Revenue filed appeal before Commissioner (Appeals) on the ground that such refund has to be ordered by way of credit in RG23A Part - II account. If no cash payments towards duty were made through PLA and the credit would have remained unutilized in the said CENVAT account, such credit cannot be allowed by way of cash - adjudicating authority should have examined as to whether after payment of this duty from the CENVAT account, the appellant paid duty from their PLA account as decided in the case of Kochar Sung-up Acrylic Ltd. (2010 (8) TMI 330 - CESTAT, NEW DELHI) and Slovak India Trading Co. Pvt. Ltd. (2006 (7) TMI 9 - HIGH COURT OF KARNATAKA (BANGALORE)). Decided in favour of assessee.

Summary

Issues:
1. Demand of duty on clearance of ingots cut end pieces to sister unit.
2. Rejection of refund claim on the ground of unjust enrichment.
3. Eligibility for cash refund from CENVAT account.
4. Examination of subsequent duty payment from PLA account.

Analysis:

Issue 1:
The case involved a demand of duty amounting to Rs.2,61,818 on the clearance of ingots cut end pieces to a sister unit without payment of duty. The appellant availed MODVAT credit on inputs and faced multiple rounds of litigation, ultimately resulting in the refund claim being sanctioned by the adjudicating authority due to the closure of the appellant's factory.

Issue 2:
The refund claim was initially rejected on the grounds of unjust enrichment by the Assistant Commissioner and the Commissioner (Appeals). However, the Tribunal remanded the matter for a denovo examination, which led to the refund claim of Rs.2,61,818 being sanctioned in cash as the appellant's factory had ceased operations.

Issue 3:
The key contention revolved around the eligibility of the appellant for a cash refund from the CENVAT account. The appellant argued that the payment made for filing the appeal before the Commissioner (Appeals) was from the CENVAT account, and subsequent duty payments were made from the PLA account, justifying the cash refund. Legal precedents and Tribunal decisions were cited to support this argument.

Issue 4:
The learned AR for Revenue contended that a cash refund from the CENVAT account was not permissible, citing the decision of the Larger Bench in Gauri Plasticulture (P) Ltd. case. The AR highlighted the absence of evidence regarding subsequent duty payments from the PLA account by the appellant, questioning the eligibility for a cash refund.

Conclusion:
After considering the arguments from both sides and reviewing the records, the judge set aside the Commissioner (Appeals) order and restored the adjudicating authority's decision, subject to verification of subsequent duty payments from the PLA account. The judgment emphasized the importance of examining whether duty payments were made from the PLA account after utilizing the CENVAT credit, aligning with relevant legal precedents and Tribunal decisions cited during the proceedings.