Cenvat credit on removal of inputs as such is limited to credit availed; refund of excess duty remains subject to unjust enrichment.
When inputs or capital goods on which credit has been taken are removed as such, the amount payable is limited to the credit availed under the then prevailing Cenvat/Central Excise rules, not a higher duty amount. The excess amount paid was therefore refundable in principle. However, the refund remained subject to the statutory bar of unjust enrichment, and a Chartered Accountant's certificate alone was held insufficient to establish that the duty burden had not been passed on. The refund claim was accordingly required to be re-examined on unjust enrichment before any grant of refund.
Issues: (i) Whether, on removal of inputs as such during the relevant period, the assessee was required to pay only the amount equal to the credit availed or a higher duty amount under the then prevailing Cenvat/Central Excise provisions. (ii) Whether refund of the excess amount paid was barred by unjust enrichment.
Issue (i): Whether, on removal of inputs as such during the relevant period, the assessee was required to pay only the amount equal to the credit availed or a higher duty amount under the then prevailing Cenvat/Central Excise provisions.
Analysis: The applicable provisions during the material period required payment of an amount equal to the credit availed in respect of inputs or capital goods when removed as such. The issue was treated as no longer res integra in view of the Larger Bench view that the liability under the relevant rules was confined to the credit availed, and the later clarification of the Board was consistent with that position.
Conclusion: The assessee was not liable to pay duty in excess of the credit availed on removal of the inputs as such; the excess amount was refundable in principle.
Issue (ii): Whether refund of the excess amount paid was barred by unjust enrichment.
Analysis: The refund remained subject to the statutory test of unjust enrichment. A Chartered Accountant's certificate alone was held insufficient to conclude that the incidence of duty had not been passed on, and the finding that refund for one period was free from unjust enrichment was not accepted as final.
Conclusion: The refund claim had to be examined afresh on the issue of unjust enrichment before grant.
Final Conclusion: The substantive entitlement to refund was upheld, but the actual grant of refund was sent back for fresh examination on unjust enrichment.
Ratio Decidendi: When inputs or capital goods on which credit has been taken are removed as such, the amount payable is limited to the credit availed, and any refund of excess duty remains subject to the statutory bar of unjust enrichment.
TaxTMI 
AI Drafter ✕
TaxTMI 
