2024 (3) TMI 180 - AT - Central Excise

Refund of the Cenvat credit reversed - Refund of duty paid on self assessment basis - benefit of exemption notification no. 30/2004-CE dated 9.7.2004 rejected - HELD THAT - There is no dispute that the appellant was eligible to the benefit of this Exemption notification and had, in fact, availed its benefit. The condition for this exemption notification is that no Cenvat credit on inputs or capital goods has been taken. On 8.7.2004, the appellant had inputs and capital goods on which Cenvat credit was taken by the appellant. Needless to say that such inputs were used to manufacture goods which were cleared therefore claiming the exemption under this notification. To claim this exemption, the appellant should NOT TAKE Cenvat credit on capital goods or inputs. When the appellant cleared the goods after 8.7.2004 availing the benefit of the notification, such goods may have been manufactured before or after this date. If the goods were manufactured before this date- either fully or partly- they would have been lying as finished goods or as work in progress on 8.7.2004 and Cenvat credit would have been availed on the inputs and capital goods which had gone into their manufacture. They can be cleared either without availing the benefit of the notification or by availing the benefit of the notification after reversing the Cenvat credit taken. Similarly, if the goods were manufactured after 8.7.2004, their inputs may have been bought after this date or may have already been bought and were lying in stock. They can be cleared under the notification only if no Cenvat credit is availed (or if it has already been availed on the inputs bought before this date, by reversing it). In Collector of Central Excise versus Flock India 2000 (8) TMI 88 - SUPREME COURT the Assistant Collector had, after examining the classification lists filed by Flock India (as assessees were required to during the relevant period), rejected the classification claimed and passed an order changing the classification. This order of the Assistant Collector was appealable but the assessee had not appealed to the Collector (Appeals). Instead, Flock India directly filed a refund application for the differential duty. Supreme Court held that refunds can be claimed if they flow from the assessment and not so as to modify the assessment. Therefore, unless the assessment order is appealed against and is modified, no refund can be sanctioned. The self-assessment and selective re-assessment by the officers were introduced initially as a practice. The question which arose in such cases was if the goods were cleared without any assessment by the proper officer, can a refund be claimed because there is no order or assessment by the proper officer to appeal against. In AMAN MEDICAL PRODUCTS LTD. VERSUS COMMISSIONER OF CUSTOMS, DELHI 2009 (9) TMI 41 - DELHI HIGH COURT and MICROMAX INFORMATICS LIMITED VERSUS UNION OF INDIA ORS. 2016 (4) TMI 1235 - DELHI HIGH COURT , Delhi High Court held that in cases where there is no assessment or order by the proper officer, refunds can be claimed without any appeal to the Commissioner (Appeals). These and several other cases were appealed to the Supreme Court by the Revenue. In this appeal, the appellant had filed the refund application without appealing against its own self-assessment and therefore no refund can be sanctioned - Appeal dismissed.

Summary

Issues:
The issues involved in the judgment are the appellant's claim of refund of Cenvat credit under a conditional exemption notification and the rejection of this claim by the Assistant Commissioner and Commissioner (Appeals).

Issue 1: Conditional Exemption Notification
The appellant, a registered manufacturer, claimed refund of Cenvat credit reversed to avail the benefit of exemption under notification no. 30/2004-CE. The condition for this exemption was not availing Cenvat credit on inputs or capital goods. The appellant had taken Cenvat credit on inputs and capital goods on 8.7.2004, which were used in manufacturing goods cleared under the exemption. The appellant argued that there was no mechanism to recover the credit already taken and no requirement in the notification to reverse the credit. However, the Tribunal held that fulfilling the condition of not availing Cenvat credit was a prerequisite for claiming the exemption under the notification.

Issue 2: Interpretation of Exemption Notification
The appellant contended that the proviso to the notification did not specify when Cenvat credit should not be availed. The Tribunal clarified that the notification required not availing Cenvat credit on inputs and capital goods used in manufacturing goods cleared under the exemption. The Tribunal emphasized that the notification's condition must be strictly interpreted, giving the benefit of doubt to the Revenue.

Issue 3: Refund Claim and Assessment
The appellant argued that it had no obligation to reverse the Cenvat credit under the notification. The Tribunal rejected this argument, stating that refund claims must flow from the assessment and cannot alter it. Citing legal precedents, the Tribunal highlighted that refunds can only be sanctioned if they do not modify the assessment order. The Tribunal emphasized that self-assessment and selective re-assessment do not entitle a refund unless the assessment is appealed against and modified.

In conclusion, the Tribunal upheld the impugned order rejecting the appellant's claim for refund of Cenvat credit, emphasizing the strict interpretation of the exemption notification's conditions and the legal principles governing refund claims based on assessments.