2018 (11) TMI 349 - AT - Central Excise

Claim of refund - Cenvat credit was reversed based on Audit Objections but no show cause notice was issues - refund rejected on the ground that the assessment has not been challenged by assessee - Section 11B of the Central Excise Act, 1944 - Held that - In the decision in the case of Aman Medical Products Ltd. 2009 (9) TMI 41 - DELHI HIGH COURT , the Delhi High Court has distinguished the Priya Blue 2004 (9) TMI 105 - SUPREME COURT OF INDIA and Flock India 2000 (8) TMI 88 - SUPREME COURT OF INDIA case and hold that if the service tax is paid on bona fide mistake then there is no need to challenge the assessment order - It was clarified in the case of Aman Medical products ltd. that the decision of the Apex Court in the case of Priya Blue Industries is applicable in a situation where there was a lis (contest) between the Department and the assessee at the time of assessment whereas in the instant case the amount was paid without contest. Therefore, the ratio of the decision in the Priya Blue Industries is not applicable in the present case. There is no assessment order passed in the present case. Therefore, the question of challenging the same does not arise. The ratio of the decision in the case of Micromax Informatics Ltd. 2016 (3) TMI 431 - DELHI HIGH COURT , Physical Research Laboratory 2016 (6) TMI 1179 - CESTAT, MUMBAI are applicable in the present case, where it was held that Under Section 27 of the Act, as it now stands, it is not open to an authority to refuse to consider the application for refund only because no appeal has been filed against the assessment order, if there is one. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Refund claim rejection based on audit objection; Challenge of assessment order; Maintainability of refund claim without challenging assessment; Interpretation of Cenvat Credit Rules.

Analysis:
The appeal challenged the rejection of a refund claim of ?8,28,292 based on an audit objection regarding irregular availment of input service credit on rent for a different unit. The appellant paid the disputed amount along with interest and penalty without contesting the audit objection. The adjudicating authority rejected the refund claim, stating that since the assessment was not challenged, the appellant was not entitled to a refund. The appellant argued that the assessment was not appealable, as there was no contest with the audit team. The appellant relied on various decisions to support their claim, emphasizing that the refund claim was made in time and on a bona fide mistake.

The Tribunal found that the appellant, a Small Scale Industry engaged in manufacturing pollution control equipment, used a rented premises (Unit-2) exclusively for job work for Unit-1. Goods processed in Unit-2 were returned to Unit-1 for further processing and clearance with payment of Central Excise duty. Although the audit initially raised no objection to claiming cenvat credit on rent for Unit-2, a later audit objected to it. The appellant repaid the credit but later sought a refund upon realizing their entitlement. The Tribunal noted that the audit assessment was not appealable and that the appellant acted on the audit team's direction in repaying the credit. Citing precedents, the Tribunal held that the appellant's refund claim was valid, as it was made in time and based on a genuine mistake. The Tribunal set aside the impugned order, allowing the appeal with consequential relief.