2022 (11) TMI 337 - AT - Central Excise

Refund of CENVAT Credit reversed under protest - clearance of the waste products namely bagasse and press mud which emerged during the course of manufacture of sugar - time limitation u/s 11B of the Central Excise Act, 1944 - HELD THAT - The appellant has reversed the credit for the period 1.4.2010 to 1.5.2013 and refund claim has also been filed for this period. The department has calculated the period of one year from the date of reversal and taken the view that the refund claim is barred by limitation. It is to be noted that the appellant had reversed the credit and intimated the department by issuing letters on various dates - the appellant has noted that they dispute the payment or reversal of credit. It is not necessary that the exact words payment made under protest has to be written by the assessee. Protest means disagreement. If a note is given along with the reversal of credit that they are paying the amount only by abundant caution and intend to proceed with litigation would necessarily mean that they are reversing the credit under protest. Further, in the present case a protest cannot be made on the invoice or bill of entry as is usually done. It is a case of making payment by reversal of credit in their CENVAT account. The only method by which the appellant could intimate or inform their protest is by issuing a letter to the department that they are paying the amount are disputing the payment made. The demand having been dropped by the department, the consequence would be that the appellant would be eligible for refund of the credit that has already been reversed. It clearly shows that the issue was under litigation which is indication of protest / disagreement. The factual matrix would be that the issue was in dispute and the appellant was disputing the amount alleged to be payable by them. The letters issued by the appellant every month intimating the reversal as well as reserving their right for litigation would show that the credit has been reversed under protest. The allegation that the refund claim is hit by time-bar cannot sustain and requires to be set aside - Appeal allowed.

Issues Involved:
1. Eligibility for refund of reversed CENVAT credit on non-excisable waste products (bagasse and press mud).
2. Applicability of the limitation period under Section 11B of the Central Excise Act, 1944.
3. Determination of whether the credit was reversed under protest.

Issue-wise Detailed Analysis:

1. Eligibility for Refund of Reversed CENVAT Credit:
The appellant, engaged in sugar manufacturing, filed a refund claim for Rs. 21,58,584/- on 19.9.2014 for the payment made under Rule 6 of the CENVAT Credit Rules, 2004 on clearance of bagasse and press mud. These by-products emerged during sugar manufacturing. Initially, the appellant reversed the credit as per Rule 6(3A) of the CENVAT Credit Rules, 2004, following the department's intimation that they were ineligible to avail credit on common inputs and input services for these waste products. However, the Hon'ble Supreme Court in Union of India Vs. DSCL Sugar Ltd. (2015) held that bagasse and press mud are non-excisable products, and no duty is payable on these items. Consequently, the appellant sought a refund of the reversed credit. The refund sanctioning authority rejected the claim as time-barred under Section 11B of the Central Excise Act, 1944, as the credit had been reversed between 1.5.2010 and 1.5.2013, but the refund claim was filed only on 19.9.2014, beyond one year from the relevant date.

2. Applicability of the Limitation Period under Section 11B:
The appellant argued that the refund claim pertains to the period 1.4.2010 to 1.5.2013 and that the credit was reversed under protest, as indicated in their intimation letters to the department. They contended that the limitation under Section 11B would not apply. The department, however, calculated the period of one year from the date of credit reversal to the date of filing the refund claim, deeming it time-barred. The department also issued a Show Cause Notice on 21.10.2015, demanding the amount of wrongly availed credit, which was later dropped by the original authority. This indicated that the appellant was eligible for a refund of the reversed credit.

3. Determination of Whether the Credit was Reversed Under Protest:
The appellant's intimation letters to the department, particularly the letter dated 3.5.2010, stated that the reversal was done without prejudice to their right to appeal. The department acknowledged receipt of this letter with an observation. The appellant argued that this intimation indicated that the credit was reversed under protest, thus nullifying the limitation period under Section 11B. The Tribunal noted that protest means disagreement, and the appellant's letters reserving their right to litigation demonstrated that the credit was reversed under protest. The issuance of the Show Cause Notice further established that the issue was under dispute, indicating protest/disagreement.

Judgment:
The Tribunal concluded that the refund claim was not hit by the time-bar under Section 11B, as the credit was reversed under protest. The decisions in Triveni Engineering and Industries Ltd. and Nasik SSK Ltd. supported this view, holding that the limitation period does not apply to amounts reversed under protest. Consequently, the Tribunal set aside the impugned order and allowed the appeal with consequential relief.

Conclusion:
The Tribunal allowed the appeal, ruling that the refund claim was not time-barred, as the credit was reversed under protest. The appellant was entitled to a refund of the reversed credit, following the principles established in previous Tribunal decisions and the Hon'ble Supreme Court's ruling on the non-excisable nature of bagasse and press mud.

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