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2018 (4) TMI 352 - AT - Central ExciseRefund of unutilized CENVAT credit - rejection on the ground that there is no specific provisions in CENVAT Credit Rules, 2004 for processing such claim and that rule 5 of CCR 2004 is a privilege that can be resorted to in relation to goods that are exported - Held that - if an assessee has CENVAT credit balance without any duty on which to apply it, such assessee is an ultimate consumer to the extent that duty or tax has been paid upto the preceding stage and there no scope for setting off of such credit - just as the ultimate consumer, as commonly understood, is. It is clear that legislative intent did not envisage the monetisation of CENVAT credit in the event of impossibility of utilisation. CENVAT Credit Rules, 2004 is not an exemption scheme but a contrivance to ensure that the incidence of duty or tax is borne by the ultimate purchaser of goods or service in a chain. It is seen that the appellant is not before the Tribunal with a valid claim of the tax/ liability having been collected from its supplier without authority of law. Neither the Central Excise Act, 1944 nor the CENVAT Credit Rules, 2004 envisages a refund of credit in the absence of such a ground. Refund not allowed - appeal dismissed - decided against appellant.
Issues:
Challenge to rejection of refund claim of unutilised CENVAT credit. Analysis: 1. The appellant challenged the rejection of their refund claim of unutilised CENVAT credit. The original authority denied the refund claim citing the absence of specific provisions in the CENVAT Credit Rules, 2004 for such claims. The Commissioner of Service Tax (Appeals) upheld this decision, relying on the decision of a Larger Bench of the Tribunal in a relevant case. The appellant cited a decision of the Hon'ble High Court of Karnataka to support their eligibility for the refund. 2. The decision of the Hon'ble High Court of Karnataka in the case cited by the appellant dealt with a claim for refund of CENVAT credit that was not utilizable due to the applicant not producing any goods during the period in question. The Hon'ble High Court of Karnataka emphasized the importance of scrutinizing each claim for refund and directed that mere statutory exclusion would not suffice. The Tribunal set aside the lower authorities' rejection of the refund claim, highlighting the need to examine the circumstances of eligibility in each case. 3. The Larger Bench, in a different case, considered the denial of refund in unique circumstances where an assessee had paid duty despite having credit available in their MODVAT credit account. The Larger Bench concluded that refund of unutilized MODVAT credit was not consistent with the law unless expressly permitted, especially not in cases other than exports. The decision emphasized that the right to refund must accrue under the law for a claim to be valid. 4. The judgment delves into the concept of CENVAT credit, which allows for the discharge of tax liability from two sources: cash deposit and credit of tax collected from the production chain. The legislative intent behind CENVAT credit rules is to ensure that the tax burden ultimately falls on the consumer. The judgment clarifies that the rules do not provide for the monetization of CENVAT credit in cases where utilization is not possible, as it is not an exemption scheme but a mechanism to shift the tax burden. 5. The judgment emphasizes that for a refund of accumulated credit to be valid, there must be a ground indicating that the tax or duty was collected without the authority of law. In this case, the appellant failed to establish such a ground for refund. The decision concludes that the lower authorities were correct in withholding the refund claim as the accumulated credit was the result of duties/taxes validly discharged by the appellant. 6. Ultimately, the appeal challenging the rejection of the refund claim of unutilized CENVAT credit was dismissed by the Tribunal based on the analysis of the legislative framework, previous decisions, and the specific circumstances of the case.
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