Cash Refund of duty paid through cenvat credit

PJ/Case Laws/2011-12/1476

Cash Refund of duty paid through cenvat credit - whether permissible?

Case: BIRLA CORPORATION LTD. v/s COMMISSIONER OF CENTRAL EXCISE, PUNE-I

Citation: 2011 (274) E.L.T. 529 (Tri.-Mumbai)

Issue:- Whether Refund of duty paid through Cenvat Credit Account can be allowed in cash on closure of factory?

Judicial precedent – When decision of higher forum on identical facts exists then different view cannot be taken.

Brief Facts:- The appellant filed appeal against the Order-in-Appeal No. P-I/VSK/114/2009 dated 30-4-2009 whereby the Commissioner (Appeals) has upheld the lower adjudicating authority's order sanctioning the refund and crediting in the CENVAT Credit account of the appellant. The appellant availed MODVAT credit of Rs. 6, 44,352/-.

The department initiated proceedings against them on the ground that the goods were not physically received in their factory premises. The proceedings were confirmed by the lower authorities. The Tribunal vide its Order No. A /500 /SMB/C-III/2008, dated 6-6-2008 [2008 (231) E.L.T. 482 (Tri. – Mum.)] finally decided the matter in appellant's favour. Consequent to this, the appellant filed a refund claim along with interest. The lower adjudicating authority sanctioned the refund claim through CENVAT credit account and rejected the claim for the interest. The appellant challenged the same before the Commissioner (Appeals) who upheld the order of the original adjudicating authority.

Appellant’s Contention:- The appellant contended that their factory is closed and the sanctioning of refund through the CENVAT credit would not be of any use to them, therefore, the refund amount should be given to them through cash. In support of their contention, they have cited the following decisions:-

(i) Slovak India Trading Co. Pvt. Ltd. v. Commissioner of Central Excise - 2006 (205) E.L.T. 956 (T)
(ii) Commissioner of Central Excise v. Deepti Chemical (P) Ltd. - 2006 (201) E.L.T. 423 (T) = 2007 (8) S.T.R. 219 (Tribunal)
(iii) Birla Corporation Ltd. v. Commissioner of Central Excise - 2008 (231) E.L.T. 482 (T)
(iv) Commissioner of Central Excise v. Ashok ARC -2006 (193) E.L.T. 399 (Jhar.)= 2007 (7) S.T.R. 365 (Jhar.)
(v) Commissioner of Central Excise, Ludhiana v. Manish Spinning Mills (P) Ltd. - 2009 (238) E.L.T. 808 (T) = 2010 (20) S.T.R. 540 (Tribunal).

In the rejoinder, they submitted that the case cited by the respondent is not applicable to their case. They also cited a case law in the case of Commissioner of Central Excise V. Jain Vanguard Polybutleme Ltd. - 2010 (256) E.L.T. 523 (Bom), wherein it was held that when question arising for consideration on fact almost identical to previous case, Revenue cannot be allowed to take different view.

Respondent’s Contention:- The respondent argued that the appellants have paid the duty demanded by the department through CENVAT Credit Account alone and not by cash. In so far as the interest is concerned, the Board's Circular No. 275/37/2K-CX.8A dated 2-1-2002, wherein it has been clarified that refund in case of deposit, a simple letter from the person who has made deposit, requesting the return of the amount, along with interest should be given by mere a simple letter. In support of their contention they submitted that Larger Bench of the Tribunal in the case of M/s. Steel Strips v. Commissioner of Central Excise, Ludhiana - 2011-TIOL-656-CESTAT-DEL-LB = 2011 (269) E.L.T. 257 (Tri.-LB) held that in absence of express provision to grant refund, that is difficult to entertain except in the case of export, where different has been paid through MODVAT.

Reasoning of Judgment:- The Hon’ble Tribunal held that it is not in dispute that the appellants have paid the demand of CENVAT credit by debiting through CENVAT Credit Account, which they were alleged to have been wrongly availed by them. The tower authorities have allowed the refund by way of CENVAT Credit. The above findings are not in dispute. Larger Bench of this Tribunal in the case of Steel Strips (supra) has held as the Modvat law has codified procedure for adjustment of duty liability against Modvat Account. That is required to be carried out in accordance with law and unadjusted amount is not expressly permitted to be refunded. In absence of express provision to grant refund, that is difficult to entertain except in the case of export. There cannot be presumption that in the absence of debarment to make refund in other cases that is permissible. Re-fund results in outflow from treasury, which needs sanction of law and an order of refund for such purpose is sine qua non. Law has only recognized the event of export of goods for refund of Modvat credit as has been rightly pleaded by Revenue and present reference is neither the case of "otherwise due" of the refund nor the case of exported goods. Similarly absence of express grant in statute does not imply ipso facto entitlement to refund. So also absence of express grant is an implied bar for refund. When right to refund does not accrue under law, claim thereof is inconceivable. Therefore, present reference is to be answered negatively and in favour of Revenue since refund of unutilized credit is only permissible in case of export of goods and for no other reason whatsoever that may be. As has been stated earlier that equity, justice and good conscience are the guiding factors for Civil Courts, no fiscal Courts are governed by these concepts, the present reference is bound to be answered in favour of Revenue and it is answered accordingly. From this, it is clear that in case of duty paid through CENVAT Credit account, the refund is to be given through CENVAT credit. The case laws cited by the appellant in the cases of Slovak India Trading Co. (supra), Ashok ARC (supra) & Manish Spinning Mills (supra) relates to refund in the case of Rule 5 of Central Excise Rules. When the judgments in the cases of Deepti Chemical (supra) and Birla Corporation Ltd. (supra) were passed, the decision of Larger Bench was not before the Tribunal. In so far as decision of Hon'ble Bombay High Court in the case of fain Vanguard Plybutlerne Ltd. (supra) is concerned, undisputedly the High Court has held that when question arising for consideration on fact almost identical to previous case, Revenue cannot be allowed to take different view.

Decision:- Appeal dismissed.

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PJ/Case Laws/2011-12/1476

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