2017 (7) TMI 23 - HC - Central Excise

Refund of unutilized CENVAT credit - Held that - The Assessee is entitled to claim refund of unutilised credit in terms of Rule 5 of 2002 Rules read with 2002 notification against the amount standing to its credit in the CENVAT credit account. There is nothing either in the Rule i.e., Rule 5 of the 2002 Rules or the 2002 notification, which provides for safe guards, conditions and the limitations which would have us conclude that the Revenue could have made the aforementioned adjustments against the closing balance reflected in the Assessee s CENVAT credit account - refund allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
Claim for refund of unutilized CENVAT credit under Rule 5 of the CENVAT Credit Rules, 2002 read with Notification No. 11/2002-Central Excise (N.T.) dated 1.3.2002.

Analysis:
1. The Assessee appealed against the Customs, Excise and Service Tax Appellate Tribunal's order reducing the refund claim of unutilized CENVAT credit from ?40,26,692 to ?39,19,239, excising ?77,453. The dispute arose from adjustments made by the Revenue against the closing balance in the Assessee's CENVAT credit account, as on 31.12.2003, relating to input credit for raw materials and finished goods. The Tribunal upheld the Revenue's decision based on calculations from the show cause notice dated 28.9.2004.

2. The Assessee argued that the Revenue's adjustment of input credit against raw materials and finished goods stock was beyond the scope of Rule 5 of the 2002 Rules and the 2002 notification. Conversely, the Revenue contended that such adjustments were necessary before granting refunds, limiting the refund to available credit, which they claimed to be ?39,49,239. The Assessee's failure to present its case before the First Appellate Authority and the Tribunal led to dismissals of the appeals.

3. The High Court reviewed the case and found that the Revenue erred in adjusting input credit against stock of raw materials and finished goods, as the Assessee was entitled to claim a refund of unutilized credit based on the amount in its CENVAT credit account. The Court determined that neither Rule 5 of the 2002 Rules nor the 2002 notification allowed for such adjustments by the Revenue. Consequently, the Court agreed with the Assessee's argument and set aside the Tribunal's decision, ordering a refund of the balance amount of ?77,453 to the Assessee.

4. The judgment highlighted the importance of adhering to the rules and notifications governing CENVAT credit refunds and emphasized that adjustments made by the Revenue must align with the established regulations. The Court's decision clarified the correct procedure for calculating and granting refunds, ensuring compliance with the legal framework.