2022 (12) TMI 1189 - AT - Central Excise

Refund claim of the amount of pre- deposit under section 11 B read with section 35 F of the Central Excise Act 1944, instead of availing credit suomoto under Cenvat Credit Rules, 2004 - HELD THAT - The appellant have suo-moto re-credited an amount of Rs 3,75,000/- for which the appellant had given the bank guarantee at the time of provisional release of the seized goods. This amount was subsequently appropriated against confiscation of the seized goods ordered by the Assistant Commissioner vide OIO dated 30.09.2005 therefore, the amount of bank guarantee has been converted to redemption fine against the confiscation of the goods. On succeeding in the appeal before the Tribunal the appellant was supposed to file a refund claim for refund of the amount of redemption fine. Whereas the appellant have taken the suo-moto re-credit as cenvat credit. As per the cenvat credit rules, an assessee can take the cenvat credit of any duty paid on the inputs used in the manufacture of final product cleared on payment of duty - In the present case the amount of redemption fine is not eligible as cenvat credit as the same is not a duty which was paid on any input received by the appellant. The right course of action about refund of the amount of bank guarantee adjusted against the redemption fine is to file a formal refund claim. The appellant is otherwise eligible to claim the refund of Rs 3,75,000/- from the department in terms of section 11 B of the Central Excise Act,1944. Since the appellant have followed the wrong procedure by re-crediting the amount of cenvat credit but otherwise the appellant is prima facie eligible for refund, The period involved in the present proceeding right from taking re-credit till the filing of refund claim is reduced for the purpose of limitation as prescribed under section11 B. The appellant has liberty to file a formal refund claim under section 11 B within three months from the date of this order. Appeal disposed off.

Summary

Issues:
1. Availing cenvat credit without following proper procedure.
2. Denial of cenvat credit by the revenue department.
3. Eligibility for refund of the amount of redemption fine.
4. Interpretation of Cenvat Credit Rules and Central Excise Act.

Analysis:
1. The case involved the appellant availing cenvat credit of Rs. 3,75,000 without following the prescribed procedure. The appellant re-credited the amount as cenvat credit, which was originally part of a bank guarantee seized by the central excise department. The tribunal found that the redemption fine amount, converted from the bank guarantee, was not eligible as cenvat credit under the Cenvat Credit Rules. The appellant was supposed to file a formal refund claim for the redemption fine instead of availing it as cenvat credit. The tribunal held that the appellant wrongly availed the cenvat credit in this manner.

2. The revenue department denied the cenvat credit claimed by the appellant, stating that the appellant had encashed the bank guarantee for provisional release of goods, while also taking cenvat credit suo moto. The department argued that the suo moto credit taken by the appellant was rightfully denied by the lower authorities. However, the tribunal found that the appellant's action of re-crediting the amount as cenvat credit was not in line with the legal requirements.

3. The tribunal acknowledged that the appellant was eligible for a refund of Rs. 3,75,000, which was initially part of the bank guarantee seized during the confiscation process. The tribunal clarified that the appellant should have followed the proper procedure of filing a formal refund claim under section 11 B of the Central Excise Act, 1944, instead of availing it as cenvat credit. The appellant was granted the liberty to file a formal refund claim within three months from the date of the tribunal's order.

4. The tribunal interpreted the Cenvat Credit Rules and the Central Excise Act to determine the correct course of action regarding the redemption fine amount. It emphasized that the redemption fine, being part of the bank guarantee, was not eligible as cenvat credit, as it did not constitute duty paid on inputs used in manufacturing final products. The tribunal clarified the distinction between cenvat credit and the refund process under the Central Excise Act, guiding the appellant on the correct procedure to claim the refund.

This detailed analysis of the judgment highlights the key issues addressed by the tribunal regarding the appellant's availing of cenvat credit, the denial of credit by the revenue department, the eligibility for refund, and the interpretation of relevant legal provisions.