2006 (2) TMI 162 - AT - Central Excise

The respondent-assessee deposited Rs. 7 Lakh (Rs. 5 Lakh by way of cash and Rs. 2 Lakh by way of reversal of Modvat Credit). Ultimately, the dispute got settled and it was found that the assessee had paid Rs. 1,10,478/- in excess. It is being pointed out that the appellant had stopped manufacturing and has also surrendered excise registration. Since the appellants are not in a position to utilise the credit already lying in their Cenvat Account - refund is allowed in cash

Summary

Issues:
- Appeal against refund payment mode
- Dispute settlement on excess payment
- Mode of refund - CENVAT credit or cash

Analysis:
1. Appeal against refund payment mode:
The appeal before the Appellate Tribunal CESTAT, New Delhi pertained to the mode of refund payment directed by the Commissioner, which the Revenue contested. The Commissioner had ordered that the refund due to the assessee should be paid in cash rather than as Modvat credit. The Revenue challenged this decision, arguing that the refund should have been given through CENVAT credit account, not in cash.

2. Dispute settlement on excess payment:
The case involved a dispute where the respondent-assessee had deposited Rs. 7 Lakh during an investigation, comprising Rs. 5 Lakh in cash and Rs. 2 Lakh through reversal of Modvat Credit. Upon settlement, it was revealed that the assessee had overpaid by Rs. 1,10,478. The Dy. Commissioner initially ordered the refund to be credited to the CENVAT account of the assessee. However, the Commissioner (Appeals) allowed the appeal, emphasizing that the refund should be made in cash, not as CENVAT credit, citing the lack of opportunity for the assessee to plead their case and the inability to utilize the existing credit.

3. Mode of refund - CENVAT credit or cash:
The key contention revolved around the mode of refund - whether it should be granted as CENVAT credit or in cash. The SDR argued that CENVAT credit refund should only be allowed into the CENVAT Credit Account, citing precedents. Conversely, the appellant's counsel highlighted that due to the cessation of manufacturing operations and surrender of excise registration by the appellant, granting a credit in the CENVAT Account would serve no purpose. The Tribunal upheld the Commissioner's decision, emphasizing that the original payment was in cash and granting the appeal would result in denying justice to the respondent, who was no longer an active assessee eligible to operate a CENVAT Credit.

In conclusion, the Appellate Tribunal dismissed the Revenue's appeal, affirming the Commissioner's order to refund the excess amount in cash rather than as CENVAT credit, considering the circumstances and the inability of the respondent to benefit from a credit in their CENVAT Account due to ceasing operations and surrendering registration.