2020 (12) TMI 753 - AT - Central Excise

Refund of unutilized CENVAT Credit - surrender of registration under Rule 5 of the Cenvat Credit Rules, 2004 - rejection on the ground that neither the refund claim is covered under Section 11B of the Central Excise Act, 1944 nor under Rule 5 of the Cenvat Credit Rules, 2004 - interest on delayed refund - HELD THAT - This Tribunal in the case of M/s Shree Krishna Paper Mills Ind. Ltd. 2018 (4) TMI 1155 - CESTAT CHANDIGARH has observed that although this Tribunal has denied refund claim in the case of Phoenix Inds Ltd 2014 (10) TMI 677 - CESTAT MUMBAI but the Regional Bench at Chandigarh is bound by the decision of Hon ble High Court of Punjab Haryana; therefore, relying on the decision of Rama Industries Ltd 2009 (2) TMI 136 - PUNJAB AND HARYANA HIGH COURT , it is held that the appellant is entitled for refund claim of unutilized cenvat credit lying in their cenvat credit account at the time of surrender of the registration under Rule 5 of Cenvat Credit Rules, 2004. Grant of interest on delayed refund after three months of filing of the refund claim - HELD THAT - In the case in hand, the claim of interest by the appellant during the course of arguments is a consequential relief, as it has been held that the appellant is entitled for refund, then they are entitled for interest also after three months of filing of the refund claim. It is a fact on record that at the time of filing of refund claim before the adjudicating authority, the appellant was not aware that the adjudicating authority will not sanction their refund claim within three months of the filing of the same. Therefore, claim of interest on delayed refund could not be raised before the adjudicating authority - Admittedly, it has been held that it is a consequential relief, therefore, the appellant is entitled for interest after three months from the date of filing refund claim. The issue of claim of interest is a legal issue and can be raised at this stage, as the appellant has succeed on merits that they are entitled for refund claim, therefore, the adjudicating authority shall entertain the claim of interest of the appellant after three months from the date of filing refund claim - Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Entitlement to refund of unutilized Cenvat credit upon surrender of Central Excise Registration.
2. Entitlement to interest on delayed refund of Cenvat credit.

Detailed Analysis:

Issue 1: Entitlement to Refund of Unutilized Cenvat Credit

The appellant's refund claim for unutilized Cenvat credit was initially rejected by the adjudicating authority and subsequently by the Commissioner (Appeals) on the grounds that it was not covered under Section 11B of the Central Excise Act, 1944, nor under Rule 5 of the Cenvat Credit Rules, 2004. The appellant argued that this issue had been settled by the Tribunal in the cases of M/s Shree Krishna Paper Mills & Ind. Ltd. and M/s Ranjeev Steels Pvt Ltd, which supported their entitlement to the refund.

The Tribunal examined the relevant legal provisions and previous judgments, noting that Rule 5 of the Cenvat Credit Rules, 2004, both before and after 01.04.2012, allowed for the refund of unutilized Cenvat credit. The Tribunal found that there was no significant change in the rule post-2012 except for the introduction of a formula for calculating refunds related to export services. The Tribunal concluded that the appellant was entitled to the refund of unutilized Cenvat credit lying in their account at the time of surrendering their registration, relying on the judgment of the Punjab & Haryana High Court in Rama Industries Ltd, which had held that refund in cash of Cenvat credit was permissible.

Issue 2: Entitlement to Interest on Delayed Refund

The appellant also claimed interest on the delayed refund of Cenvat credit, which was raised for the first time at the appellate stage. The Tribunal considered whether this new issue could be entertained at this stage. It was noted that legal issues, such as the entitlement to interest on delayed refunds, could be raised at any stage of the proceedings. The Tribunal referred to the Supreme Court's judgment in M/s Ranbaxy Laboratories Ltd, which established that interest is payable on refunds if the refund is not sanctioned within three months from the date of filing the claim.

The Tribunal held that the appellant was entitled to interest on the delayed refund of Cenvat credit, as it was a consequential relief following the determination that the refund itself was justified. The adjudicating authority was directed to calculate and grant interest from three months after the date of filing the refund claim.

Conclusion:

The appeal was allowed with consequential relief, including the refund of unutilized Cenvat credit and interest on the delayed refund. The adjudicating authority was instructed to process the refund claim and calculate the interest due in accordance with the Tribunal's findings and the Supreme Court's precedent.