2016 (11) TMI 147 - AT - Central Excise

Refund claim in cash - MS pipes for use in irrigation - Rule 5 of the Cenvat Credit Rules - sanction of refund to the appellant and direction to take recredit of the same in the cenvat account and sanctioned partial amount in cash which was paid in PLA - Held that - reliance placed in the decision of Gauri Plasticulture (P) Ltd. vs. CCE 2006 (8) TMI 225 - CESTAT MUMBAI where it was held that if the said refund is granted to the appellants by way of cash the same would amount to making him unjustifiable enrich. It is well settled principles of law that what cannot be done directly should not be allowed to be done indirectly. On surrendering of their licence the appellants was not allowed to claim the refund of the unutilized credit in the Modvat account the same would have lapsed. As such utilization of the same towards payment of disputed demand of duty after surrendering of their registration has not led to a situation where the assessee was compelled not to use the credit for regular clearances and had to make payment from PLA. As such in this case we find that the refund in cash is not to be allowed. The appellant had paid more amount through PLA then the utilization of cenvat credit - appellant eligible to get the amount of refund in cash - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the appellant is entitled to a refund in cash for duty paid during fabrication of MS pipes for irrigation.
2. Interpretation of Rule 5 of the Cenvat Credit Rules regarding refund eligibility.
3. Application of principles of equity, justice, and good conscience in granting cash refunds.
4. Verification of duty payments made through PLA and utilization of cenvat credit.
5. Admissibility of refund in cash based on the Tribunal's Larger Bench decision in the case of Gauri Plasticulture (P) Ltd.

Analysis:
1. The appeals were filed against an order-in-appeal regarding duty payment during MS pipe fabrication. The Tribunal previously held no duty liability, leading to refund claims by the appellants. The adjudicating authority sanctioned a partial refund, directing recredit in the cenvat account. The first appellate authority upheld this decision, prompting the current appeal.

2. The learned counsel referenced the Tribunal's Larger Bench decision in Gauri Plasticulture (P) Ltd. vs. CCE, Indore, arguing for the application of principles laid down in that case. The departmental representative contested, emphasizing the lack of evidence on project closure or surrender of excise registration, questioning the cash refund eligibility under Rule 5 without export involvement.

3. The Tribunal directed verification of duty payments vis-a-vis cenvat credit utilization. The verification report confirmed excess duty payments through PLA. Citing the Larger Bench decision, the Tribunal highlighted the principle of refunding cash for duties paid due to revenue actions preventing credit utilization, ensuring equity and justice.

4. The Larger Bench's decision emphasized that if denial of credit led to cash duty payments, cash refunds are warranted. However, if no cash payments were made and credit remained unutilized, cash refunds are not permissible. Applying this principle to the case, the Tribunal found the appellant eligible for a cash refund due to excess PLA payments.

5. Consequently, the Tribunal set aside the impugned order and allowed the appeals, granting the appellant the refund in cash as per the principles established in the Gauri Plasticulture case. The decision was based on the direct applicability of the Larger Bench's ruling on the issue, ensuring the appellant's entitlement to the cash refund.