2022 (12) TMI 54 - AT - Central Excise

Rejection of cash refund claim of unutilized credit - refund claim was rejected on the ground that as per Rule 57(13) it is not necessary to allow refund if manufacturer is able to use the credit for payment of duty - Rule 57F(1) of Central Excise Rules, 1944 - HELD THAT - On perusal of facts, it is seen that the refund claim was originally returned to the appellant stating that they could use the accumulated balance credit for payment of duty on goods cleared for home consumption. The appellant approached the department to process the refund claim and pass a speaking order. Interestingly, thereupon Order in Original No. 108/199 was passed rejecting the refund holding that there is no balance to sanction refund. As per the appeal preferred by the appellant, the matter was remanded to the original authority with a direction to issue Show Cause Notice and re-examine the claim. I fail to understand why repeated Show Cause Notices have been issued even though it is a remand by the first appellate authority. The department then opted to adjudicate the second Show Cause Notice and rejected the claim stating that there is delay on the part of the appellant to press for processing of the claim. How can the appellant be said to be at fault when the matter has been remanded by Commissioner (Appeals) directing to re-examine the matter after issuing Show Cause Notice. After hearing the matter on 8.9.2022, it was posted for clarification on the side of the department as to whether there is a dispute with regard to the balance available in their register as on the date of filing the refund claim. The department has not put forward any reply or clarification. From the arguments put forward by the learned counsel for appellant and also the photocopies of the relevant part of the registers furnished by the learned counsel for the appellant, I find that the contention of the appellant that there was wrong debit entry and contra credit entry made in the registers is not without substance. From the letters written by the appellant to the department, it is seen that they have produced these documents before the authorities below also. The rejection of refund claim is on erroneous facts and misconception of Rule 57F of Central Excise Rules, 1944 - Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Rejection of refund claim of Rs. 2,97,007/-.
2. Utilization of MODVAT credit and maintenance of separate registers.
3. Adjudication process and issuance of multiple Show Cause Notices.
4. Interpretation and application of Rule 57F(13) of Central Excise Rules, 1944.
5. Alleged delay by the appellant in pursuing the refund claim.

Issue-wise Detailed Analysis:

1. Rejection of Refund Claim of Rs. 2,97,007/-:
The appellant's refund claim of Rs. 2,97,007/- filed on 30.11.1998 was rejected by the department on the grounds that the appellant could utilize the credit for payment of duty on goods cleared for home consumption. The original authority held that there was no balance of unutilized credit for granting the refund, as the MODVAT credit had already been utilized.

2. Utilization of MODVAT Credit and Maintenance of Separate Registers:
The appellant maintained two separate RG23A Part II registers for MODVAT credit, one for export clearances and the other for domestic clearances. The adjudicating authority noted that the appellant had made wrong debit entries in the export register, which should have been made in the domestic register. The correction of these entries was later done, but the confusion persisted due to the maintenance of separate registers.

3. Adjudication Process and Issuance of Multiple Show Cause Notices:
After the initial rejection, the Commissioner (Appeals) remanded the matter for denovo examination, directing the issuance of a Show Cause Notice. Subsequently, multiple Show Cause Notices were issued, including one on 9.2.2000 and another on 10.3.2015. The appellant continuously requested for the processing of the refund claim, but the delay and multiple notices complicated the adjudication process.

4. Interpretation and Application of Rule 57F(13) of Central Excise Rules, 1944:
Rule 57F(13) allows the manufacturer to utilize MODVAT credit for payment of duty on final products cleared for home consumption or for export on payment of duty. If such adjustment is not possible, the manufacturer is entitled to a refund. The department argued that the appellant could utilize the credit for home clearances, thus denying the cash refund. However, the appellant contended that they had valid reasons for not being able to utilize the credit and therefore, the refund should be allowed.

5. Alleged Delay by the Appellant in Pursuing the Refund Claim:
The department rejected the refund claim citing laches on the part of the appellant, stating that there was a long period of inactivity from 2000 to 2008 and from 2009 to 2013. The appellant countered this by stating that they were continuously corresponding with the department and requesting for personal hearings.

Judgment:
The Tribunal found that the rejection of the refund claim was based on erroneous facts and a misconception of Rule 57F of Central Excise Rules, 1944. The appellant had sufficient balance in their MODVAT account, and the confusion arose due to the wrong debit entries and subsequent corrections in their registers. The Tribunal emphasized that both registers should be considered as a whole to determine the balance credit. The impugned order was set aside, and the appeal was allowed with consequential relief.

Conclusion:
The Tribunal concluded that the appellant's refund claim should be granted, as the rejection was based on incorrect facts and misinterpretation of the relevant rules. The case highlighted the importance of proper maintenance of records and the need for clear communication between the appellant and the department to avoid such disputes.

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