2017 (5) TMI 1017 - AT - Central Excise

Refund claim - reversal of credit held to be ineligible - re-credit of the reversed CENVAT valid or not? - Held that - one of the specified circumstances wherein, instead of transfer to the Fund the amount is paid to the claimant of refund, is the refund of CENVAT credit enabled by a specific rule or notification made under the CEA, 1944. This circumstance is an obvious reference to the refund provision in the CENVAT Credit Rules, 2004 that envisages a cash transfer to the claimant - unless such a cash transfer is occasioned, the provisions of section 11B of CEA would not apply - appellant not entitled to refund - appeal dismissed - decided against appellant.

Summary

Issues:
Refund claim rejection based on eligibility for CENVAT credit.

Analysis:
The appellant, M/s Laboratory Griffons Pvt Ltd, appealed against the rejection of its refund claim amounting to ?2,04,762 and ?68,355. The claim was denied by lower authorities after assessing the eligibility for CENVAT credit, which was disallowed. The appellant had reversed the credit deemed ineligible without contesting the disallowance and subsequently sought a refund under section 11B of the Central Excise Act, 1944.

Upon hearing both the counsel for the appellant and the Authorized Representative, the Tribunal delved into the legality of the appellant's approach to re-credit the reversed CENVAT amount. Section 11B of the Central Excise Act, 1944 governs the refund procedure, involving the transfer of an excess tax amount from the Consolidated Fund of India to the assessee. The provision maintains the refund mechanism despite the shift towards credit schemes to offset tax cascading effects. The Tribunal inferred that re-crediting a disallowed credit does not align with the section 11B mechanism.

Moreover, the Tribunal pointed out that the default outcome of a refund sanction is the transfer of the amount to the Consumer Welfare Fund, except in specified circumstances. Enriching the Fund with a transfer from a Central Excise assessee's CENVAT credit account would be illogical. Notably, one such specified circumstance for direct payment to the claimant is the refund of CENVAT credit under specific rules or notifications. This exception refers to the refund provision in the CENVAT Credit Rules, 2004, which envisions cash transfer to the claimant. Consequently, unless a cash transfer occurs, section 11B of the Central Excise Act, 1944 does not apply, rendering the appellant ineligible for a refund under this provision.

In conclusion, the Tribunal found the appeal devoid of merit and rejected it, emphasizing that the appellant is not entitled to a refund under section 11B of the Central Excise Act, 1944. The judgment was pronounced in court on 24/04/2017.