2024 (2) TMI 368 - AT - Central Excise

Refund of the CVD and SAD as the appellant did not avail Cenvat Credit - The appellant imported capital goods under EPCG scheme. As export obligation could not be fulfilled, the appellant paid Customs duties viz., BCD, CVD and SAD along with interest thereon - Rejection on the ground that the import conditions were not fulfilled - HELD THAT - CENVAT Credit Rules 2004 includes capital goods in the definition of inputs . The reason and legal provisions why the learned Commissioner (Appeals) came to the conclusion that duty paid on excisable goods which are inputs alone are eligible and duty paid on capital goods cannot be refunded, is not discussed and is hence not clear. It is also noted that the Original Authority had not disputed the eligibility to CENVAT credit for the capital goods under CCR,2004. The impugned order is hence based on a new ground. A rounded examination of the issue has not been done. The reasons given by the Original Authority and the judgment of M/S. SERVO PACKAGING LIMITED VERSUS COMMISSIONER OF G.S.T. AND CENTRAL EXCISE, PUDUCHERRY 2020 (2) TMI 353 - CESTAT CHENNAI do not form a part of the impugned order into which the OIO has merged. There are no legal grounds in the impugned order to have rejected the claim for refund. The appellant on the other hand has made out a strong case in their favour - appeal allowed.

Summary

Issues:
The issues involved in the judgment are the eligibility of refund for duty paid on capital goods under the EPCG scheme and the interpretation of CENVAT Credit Rules 2004.

Eligibility of Refund for Duty Paid on Capital Goods:
The appellants imported capital goods under the EPCG scheme but could not fulfill the export obligation, leading them to pay import duty including CVD and SAD. They claimed refund of the duty paid as CENVAT Credit under Section 142(3) of the CGST Act, 2017. The refund was rejected on the grounds that duty paid on capital goods is not eligible for refund, only duty paid on excisable goods used as inputs is refundable. The appellant argued that the transitional provisions in the GST statute allow for refund of CENVAT credits eventually accrued, citing relevant sections of the CGST Act, 2007. The appellant contended that the CENVAT Credit Rules, 2004, allowed duties paid on imported goods to be availed and utilized as CENVAT Credit. The rejection of the refund claim was deemed biased and lacking proper consideration of relevant legal provisions.

Interpretation of CENVAT Credit Rules 2004:
The Commissioner (Appeals) upheld the rejection of the refund claim stating that duty paid on excisable goods used as inputs is eligible for refund, while duty paid on capital goods is not refundable. The appellant argued that CENVAT Credit Rules 2004 include capital goods in the definition of 'inputs' and the reasons for the Commissioner's conclusion were not clear. The appellant highlighted the importance of providing clear legal grounds for decisions, citing a judgment by the Hon'ble Apex Court. The impugned order was criticized for lacking a thorough examination of the issue and not considering the appellant's strong case in their favor.

Conclusion:
The Appellate Tribunal set aside the impugned orders and allowed the appeals, granting consequential relief as per law. The judgment emphasized the importance of clarity and citing legal provisions in decisions to ensure legitimacy and understanding of the rationale behind the judgment.