2018 (7) TMI 424 - AT - Central Excise

Refund of duty paid in cash - appellant not in the position to utilize the Credit as the factory was closed - rejection of refund on the ground of non-availability of TR-6 challan - threshold limit of SSI exemption crossed and the duty was paid - Held that - It is not disputed that the duty was paid by TR-6 Challan in cash and as such even if the original copy of the same is not available with the appellant, the said fact cannot be adopted as a reason for denial of refund to the assessee. The refund of excess accumulated credit, at the time of closure of the factory, is not permissible under any rule or section of the Rules or the Act, but the appellant had been contesting about the availability of the credit right from the beginning, when they discharged their duty liability in cash. As such, instead of paying duty in cash, the same was payable by way of utilization of credit and would have been paid by using such credit. In such a scenario duty already paid in cash is required to be returned back to the appellant and the same is required to be neutralized against the credit made available to the appellant. Refund allowed to the extend of credit that could have been utilized.

Summary

Issues:
1. Availability of Cenvat Credit
2. Imposition of Penalty
3. Refund of Duty Paid in Cash

Availability of Cenvat Credit:
The appellant, engaged in manufacturing, exceeded the exemption clearance limit under the small scale Notification, leading to a duty liability. Initially, no duty was paid as they believed they were within the exemption limit. Upon demand, they paid duty and sought Cenvat credit. The Commissioner(Appeals) allowed the credit, but the factory was closed, preventing its use for future duty payments. The appellant requested a refund of the duty paid in cash and to adjust it against the Cenvat credit. The Assistant Commissioner denied the refund due to the absence of TR-6 challans, and the Commissioner(Appeals) rejected it citing that refunding Cenvat credit is impermissible. However, the Tribunal noted that the duty was paid via TR-6 Challan and the denial based on the absence of the original challan was unfounded. The Tribunal also emphasized that the appellant, having contested for credit availability from the beginning, was entitled to the credit as per the order of the Commissioner(Appeals).

Imposition of Penalty:
The original adjudicating authority confirmed the duty payment but did not impose a penalty. Both the appellant and the Revenue appealed against this decision. The Commissioner(Appeals) accepted the appellant's appeal regarding Cenvat credit but allowed the Revenue's appeal for the penalty imposition, equal to the confirmed duty amount. The appellant then appealed to the Tribunal, which set aside the penalty. The Tribunal's decision was based on the appellant's entitlement to Cenvat credit, which influenced the penalty imposition.

Refund of Duty Paid in Cash:
The appellant sought a refund of the duty paid in cash to adjust it against the Cenvat credit they were entitled to. The original adjudicating authority denied the refund, stating that the duty had been paid in cash and appropriated by the department, making no refund admissible. The Commissioner(Appeals) upheld this decision. However, the Tribunal disagreed, emphasizing that the duty paid in cash should be returned to the appellant and neutralized against the credit granted by the Commissioner(Appeals). The Tribunal cited a previous case to support this stance. The appellant agreed not to claim a refund for any excess credit remaining after adjusting it against the duty paid in cash.