Whether assessee is eligible for refund of reversal when no proceedings were initiated?

PJ/CASE LAW/2015-16/3023

Case:NSP ELECTORNICS LTD. VersusCOMMISSIONER OF CENTRAL EXCISE, BANGALORE

Citation: 2016 (331) E.L.T. 451 (Tri. - Bang.)

Brief Fact: Appellant is engaged in the manufacture of ‘Printed Circuit Board’ falling under Chapter Heading 8534.00 of the Central Excise Tariff Act, 1985. They were availing benefit of Cenvat credit of service tax paid on GTA service utilized for outward transportation of excisable goods from the factory. During the course of audit, the visiting officers entertaining a view that they are not entitled to the credit of service tax paid on such GTA service. Accordingly, they raised objections and directed the appellants to reverse the credit of Rs. 1,94,086/-. Accordingly, the appellants debited the same along with interest of Rs. 26,759/- in their Cenvat credit account on 27-4-2007.
Subsequent to the said debit so made by the appellant, no proceedings were initiated against them by the Revenue for adjudication on the said disputed issue and the debit entry was never appropriated towards any payment of duty confirmed against them. The appellant subsequently claimed refund of the said debited amount vides their application dated 17-6-2008. The same stands denied by the lower authorities on the grounds that the refund claim has been made after a period of one year from the date of the debit. Hence, the present appeal.

Reasoning of Judgment:After hearing both sides, Tribunal find that the facts are not in dispute. The only issue required to be decided is as to whether the refund made by the appellants is barred by limitation or not. The issue of availment of credit of tax paid on GTA services used for outward transportation of the final product stands decided in favour of the assessee by Larger Bench decision of the Tribunal in the case of ABB Ltd. [2009 (15)S.T.R.23 (Tri. - LB)], which stands upheld by the Hon’ble High Court of Karnataka reported in 2011 (23)S.T.R.97 (Kar.)], laying down that the GTA service utilized for outward transportation of the goods from the factory gate to the customers’ premises are cenvatable. As such, it is to be only seen as to whether the refund would be barred by limitation or not.
It is well settled law that the officials working under the Central Excise Act cannot travel beyond the Act and are bound by the provisions of the Central Excise Act. However, the real legal issue required to be considered in the present case is as to whether the provisions of Section 11B of the Central Excise Act requiring the assessee to file refund claim within the period of one year from the relevant date, would be applicable to the facts of the present case or not. The appellants have taken a categorical stands that the amount in question cannot be considered to be duty inasmuch as there is neither any adjudication proceedings nor even any proposal to confirm the same. In such a scenario, the said reversal entry has to be treated as ‘deposit’, in which case the limitation would not apply.
It is undisputed that the appellants debited the Cenvat credit on the instructions of the audit team. The audit has no jurisdiction to adjudicate the disputed issue. Once the debit is made at the instructions of the audit team, the Revenue is under a legal obligation to initiate proceedings for confirmation of the amount in question, by deciding on the disputed legal issue. No such proceedings, by way of show cause notice stands initiated against the appellants and the deposit so made by them does not stand forfeited or appropriated towards any confirmed demand. As such, the appellants are right in contesting that deposit made during the audit cannot be held to be falling under the umbrella of Section 11B of the Central Excise Act.
Reference, to support the above view can be made, to the Tribunal’s decision in the case of Aptar Beauty & Home India Ltd. v. C.C.E., Bangalore [2014 (312)E.L.T.781 (Tri.-LB)] wherein an identical issue was the subject matter of the decision. By taking note of the Board’s Circular No. 290/6/97-CX, dated 20-1-1997, the Tribunal observed as under :
“5. I have considered the submissions made by both sides and perused the records. The issue to be decided in this case is whether the amount paid by the appellants on the direction of the audit team is to be considered as an amount of duty payable or an amount paid by them to the Revenue for which they have filed a refund claim.
6. On the factual matrix, I find that there is no dispute regarding the clearances of the goods to the SEZ units. It is also undisputed that the clearances which were made to SEZ units are not liable for duty. The only dispute that has been created by the audit team is that the appellant has cleared the goods under ARE-1; without executing bond and on letter of undertaking before affecting the clearances to the units in SEZ violating provisions of Central Excise Rules, 2002. Even assuming that there was violation of provisions of Central Excise Rules, at the most appellants can be penalized for the violation of the said rules, on the face of the facts that there is no dispute regarding the goods cleared from the appellants’ units have reached the SEZ units and re-warehousing certificates were submitted to the authorities. It is also not disputed that the said re-warehousing certificates are genuine, in the absence of any contrary findings, in my considered view, the amount reversed by the appellants on 23-11-2007 by debit in Cenvat account cannot be considered as an amount of duty due to the Revenue. If that be so, the refund claim filed by the appellants would squarely fall under the category as enumerated by the Board in their circular dated 20-1-1997. In my considered view, if an amount which is not payable by the assessee on the merits of the case, then it is an amount which is retained by the Revenue which is not due to the Government. In view of the foregoing, the impugned order is not correct and liable to be set aside and I do so. The impugned order is set aside and the appeal is allowed with consequential relief, if any.”
The Hon’ble Gujarat High Court in the case of Shree Ram Food Industries v. Union of India [2003 (152)E.L.T.285 (Guj.)] observed that the deposit made during the investigation would not be subjected to the limitation period.
In view of the above, Tribunal set aside the impugned order and allow the appeal with consequential relief to the appellants.

Decision: Appeal allowed.

Comment:The gist of the case is that appellant debited the cenvat credit on the instruction of the audit team. Once the debit is made at the instruction of the audit team, the revenue is under obligation to initiate proceedings for confirmation of the amount in question, by deciding on the disputed legal issue. No such proceedings initiated against appellant and the deposit so made by them does not stand appropriate towards any confirmed demand. Hence, the appellants are right in contesting that deposit made during the audit cannot be held to be falling under the umbrella of Section 11B of the Central Excise Act. Therefore the assessee is eligible for refund and limitation period will not be applicable in respect of deposit made during the investigation.

Prepared By:Anash kachaliya

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PJ/CASE LAW/2015-16/3023

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