2020 (4) TMI 471 - AT - Central Excise

Refund of CENVAT Credit - refund rejected on the ground of time limitation and unjust enrichment - goods supplied to navy in terms of N/N. 64/95-CE dated 16.03.1995 - wrongful reversal of credit as per under Rule 6 (3A) of CCR - whether the wrong reversal of amount in the cenvat credit account by the appellant would amount to payment of duty to the Government? - HELD THAT - The Tribunal in the case of COMMISSIONER OF CENTRAL EXCISE SERVICE TAX, TIRUPATI VERSUS M/S SNJ SUGARS AND PRODUCTS LTD. 2018 (3) TMI 345 - CESTAT HYDERABAD where it was held that the amount paid by respondent being an amount and does not amount to duty, the provisions of Section 11B of the Central Excise Act, 1944, would not get attracted to such refund claims, and the bar of unjust enrichment will not apply, as the said provisions of Section 11B of Central Excise Act, will apply to refund is a duty. The rejection of refund on the ground of time bar cannot sustain - The Commissioner (Appals) has remanded to look into the issue of unjust enrichment. The appellant has to establish that the duty burden has not been passed on to another in the remand proceedings ordered by the Commissioner (Appeals) - appeal allowed in part and part matter on remand.

Summary

Issues:
Refund claim for cenvat credit reversal on goods supplied to Navy - Eligibility for refund - Time limitation under Section 11B of Central Excise Act, 1944.

Analysis:
The case involves the appellants engaged in manufacturing air compressors, availing cenvat credit, and supplying goods to the Navy under exemption. The appellants reversed credit under Rule 6 (3A) for goods supplied to Navy, later realizing the error and filing a refund claim. The Commissioner (Appeals) allowed a partial refund, citing limitation under Section 11B for the remaining amount. The main issue is whether the reversal of credit amounts to duty payment to the Government, affecting the applicability of Section 11B.

The Ld. Consultant argued that the reversal in the cenvat credit account does not constitute actual duty payment, thus Section 11B's limitation should not apply. He relied on a precedent to support his argument. On the other hand, the department contended that refund claims fall under Section 11B, and the limitation applies. The Commissioner (Appeals) held that the refund claim was partly time-barred, leading to the current appeal before the Tribunal.

The Tribunal analyzed the situation, referring to a previous case where it was established that the amount paid as reversal for exempted goods does not constitute duty. Citing the decision, it was concluded that Section 11B does not apply to refund claims that do not involve duty payment. Additionally, a judgment by the High Court emphasized that refund claims cannot be barred by limitation if the tax was paid by mistake, as it goes against the constitutional mandate. Consequently, the Tribunal held that the rejection of the refund claim on the grounds of time limitation cannot be sustained. The Commissioner (Appeals) was directed to reexamine the issue of unjust enrichment, requiring the appellant to prove that the duty burden was not passed on to others. The appeal was allowed with consequential relief regarding the limitation issue.