2023 (11) TMI 1026 - AT - Central Excise

Area Based Exemption - Recovery of excess refund sanctioned to the assessee in the initial month where the Cenvat credit was not fully utilized - Utilization of CENVAT Credit in the subsequent period - HELD THAT - During the hearing, it is informed by the Ld.D.R. that this bench has decided similar issue in the case of M/S OZONE PHARMACEUTICALS AND M/S OZONE AYURVEDICS LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE SERVICE TAX, GUWAHATI 2023 (9) TMI 1371 - CESTAT KOLKATA , wherein the appeal filed by the Appellant was allowed - It was held in the said case that the refund claim of the appellants for the subsequent period, could not be rejected on the ground that the appellant has taken excess refund for the period prior to 22.12.2002, therefore, no demand is sustainable against the appellant as demanded in view of the letter dated 03.06.2003 by the Deputy Commissioner and the refund for the period August, 2006 to October, 2006 were not required to be appropriated. The demand confirmed in the impugned order is not sustainable and is set aside - appeal allowed.

Summary

Issues Involved:
1. Applicability of Notification 32/99-CE and subsequent amendments.
2. Retrospective effect of Notification 61/2002-CE and its implications.
3. Validity of demand for recovery of excess refund sanctioned.

Summary:

1. Applicability of Notification 32/99-CE and Subsequent Amendments:
The Appellants, manufacturers of cosmetics, availed the benefit of Notification 32/99-CE, which provided excise duty exemption for units in Export Promotion Industrial Parks (EPIP) in Assam. This exemption was initially granted by refunding the excise duty paid through the Personal Ledger Account (PLA). However, on 23.12.2002, Notification 61/2002-CE amended the original notification, stipulating that refunds would only be granted after utilizing the entire CENVAT credit available.

2. Retrospective Effect of Notification 61/2002-CE:
The Finance Act, 2003, gave retrospective effect to the amendments made by Notification 61/2002-CE, effective from 08.07.1999. This meant that the restrictive conditions introduced by the amendment were deemed to have been in place from the original date of Notification 32/99-CE. Consequently, the department was empowered to recover any excess refunds granted due to non-compliance with the amended conditions.

3. Validity of Demand for Recovery of Excess Refund Sanctioned:
The Deputy Commissioner of Central Excise, Guwahati, confirmed a demand of Rs.22,01,868/- along with interest for the period 24.02.2000 to 22.12.2002, which was upheld by the Commissioner (Appeals). The Appellant contended that they had complied with the amended notification from 23.12.2002 by utilizing the accumulated CENVAT credit and thus did not receive any excess refund. They argued that the retrospective application of the amendment should not lead to recovery since the intent of the amendment was met by their subsequent compliance.

The Tribunal referred to similar cases, notably Commissioner of C. Ex., Jammu vs. New India Wire and Cables, where it was held that if the excess refund was neutralized by lesser refunds in subsequent periods, no loss to revenue occurred, and thus no demand was sustainable. The Tribunal also noted that the demand was not sustainable as it was a situation of revenue neutrality, citing several judicial precedents supporting this view.

Conclusion:
The Tribunal found that the facts and circumstances of the present case were identical to those in the cited precedents. It held that the demand confirmed in the impugned order was not sustainable and set aside the order, allowing the appeal with consequential relief as per law.