Whether suo motto credit taken by assessee due to delay in sanction of refund proper?

PJ/Case Law /2016-17/3319

Case:-M/s JAYASWAL NECO INDUSTRIES LTD Vs COMMISSIONER OF CENTRAL EXCISE, NAGPUR

Citation:-2016-TIOL-341-CESTAT MUM

Brief facts:-The fact of the case is that there was proceedings on the classification dispute and denial of Exemption Notification of the goods manufactured by the appellant. The said dispute came to be settled by this Tribunal order No. E/1148/97B1 dated 8/7/1997. This Tribunal's order was challenged by the department before Hon'ble Supreme Court by way of appeal which was dismissed by the Hon'ble Supreme Court vide order dated 20/2/1999. During the proceedings appellant had deposited entire excise duty demand and subsequently after adjudication they paid penalty amount also. The appellant filed refund claim for the said amount vide refund application dated 20/2/1997. The refund was sanctioned but credited into Consumer's Welfare fund vide order in original dated 27/1/2000. Aggrieved by the said order, Revenue as well as appellant filed appeals before the Commissioner (Appeals) who vide order dated 31/8/2001 dismissed the Revenue's as well as appellant's appeal. The appellant challenging the Commissioner (Appeals) order dated 31/8/2001 filed appeal before this Tribunal which was allowed by order dated 24/1/2008. Thereafter appellant by letter dated 20/2/2008 intimated to the department regarding suo moto credit of the amount for which refund was sought for. The department issued show cause notice, on the ground that the appellant was not supposed to take suo moto credit and proposed to disallow the recredit. The show cause notice culminated into order in original wherein adjudicating authority vide order in original dated 18/11/2009 dropped the proceedings. Aggrieved by the said order, Revenue filed appeal before the Commissioner (Appeals) which was allowed vide order in appeal dated 9/7/2010 and the Ld. Commissioner (Appeals) demanded interest as well as imposed equivalent penalty, therefore appellant is before Tribunal.

Appellant’s contention:-Shri P.V. Sadavarte, Ld. Counsel for the appellant submits that against the order in original, Revenue filed appeal before the Ld. Commissioner (Appeals) only on the ground that the appellant has not followed the procedure laid down under Section 11B for grant of refund and suo moto credit taken by the appellant was not ground in the Revenue's appeal therefore order of the Ld. Commissioner (Appeals) is not correct and beyond the ground taken by the Revenue in their appeal. He further submits that their refund application was already filed under Section 11B therefore proceedings of the very same application reached up to this Tribunal and this Tribunal has allowed the appeal of the appellant, department was supposed to implement the order of this Tribunal.

Respondent’s contention:-Shri Ashutosh Nath, Ld. Asstt. Commissioner (A.R.) appearing on behalf of the Revenue reiterates the findings of the impugned order. He submits that there is no provision in law to take suo moto recredit of any amount paid by the assessee therefore Ld. Commissioner (Appeals) has rightly denied the recredit taken by the appellant. In support of his submission, he placed reliance on following judgments:

(a) Parvati Agro Plast Vs. Commissioner of Central Excise, Kolhapur 2013-TIOL-1563-CESTAT-MUM
(b) M/s. Matrix Laboratories Vs. Commissioner of Central Excise, Hyderabad 2012- TIOL-1297-CESTAT-BANG
(c) New Allenberry Works Vs. Commissioner of Central Excise, Kolkata 2012-TIOL-1239-CESTAT-KOL
(d) Titawi Sugar Complex Vs. Commissioner of C. Ex. MeerutI [2009 (247) ELT 519 (Tri. Del.]

Reasoning of judgement:-The Tribunal carefully considered the submissions made by both sides.
As regard the refund application, the applicant has filed refund claim immediately after settling the dispute of classification vide their application dated 20/2/1997, which was disputed and matter of the refund was finally decided by this Tribunal vide Order dated 20/8/2008 thereafter it is the department who was supposed to grant the refund by implementing this Tribunal's order. However, the appellant had taken suo moto credit. In the Tribunal’s view there is no provision in Law to take suo moto credit of any amount paid during the litigation of the matter, the only course of action is to seek refund under Section 11B. However, refund application was already filed with the department and it was not processed. In view of this Tribunal order dated 24/1/2008 there is no dispute that appellant is entitle for refund along with consequential relief. In view of this fact, The Tribunal directed the appellant to reverse the Cenvat credit taken suo moto by them and the Adjudicating authority is directed to sanction the refund claim in accordance with law. Taking into consideration the facts and the circumstances of the case, since the appellant was entitled to refund after Tribunal order dated 24/1/2008 it is a case of Revenue neutral therefore interest and penalties are dropped. Due to peculiar facts involved in the case, since appellant had taken credit and enjoyed credit, they are not entitle for the interest only for the period i.e. from the date of taking suo moto credit till the sanction of refund claim. Appeals are disposed of in above terms.

Decision:-Appeal disposed of.

Comment:-The gist of the case is that assessee is not entitled for suo motto credit for the amount claimed as refund but not sanctioned to him. The Department was supposed to grant refund by implementing the order of the Tribunal. However, appellant took suo motu credit for which there is no provision and the proper course of action was to seek refund u/s 11B of CEA, 1944. However, in the present case, the refund claim was already filed with department and it was not processed. Hence, the appellant was directed to reverse the CENVAT credit taken suo motu and adjudicating authority was directed to sanction the refund claim in accordance with law. Since the assessee had taken and enjoyed the credit, he was not entitled for interest for the period.

Prepared by:- Praniti Lalwani

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PJ/Case Law /2016-17/3319

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