2013 (7) TMI 562 - AT - Central Excise

Interpretation of Exemption Notification No. 56/2002 CE: Refund granted via PLA payment method

M/s. Paramount Pharma Versus Commissioner of Central Excise Jammu

The judgment revolves around the correct interpretation of area-based exemption notification No. 56/2002 CE. The appellant's refund claim, initially ... Area Based exemption - Notification No. 56/2002 CE dated 14.11.02 - The Notification requires the manufacturing unit situated in that area to first pay the Central Excise duty on the goods cleared from the factory from their Cenvat credit account. On exhausting of Cenvat credit account, duty is required to be paid from the PLA and said duty paid from PLA is refunded to the manufacture – Appellant was having Cenvat credit balance of Rs.10,10,421/- - the same was erroneously shown as Rs.11,58,395/- - While discharging duty liability, the appellant showed the duty payment from the Cenvat credit account by treating as if the total balance was Rs.11,58,395/- and paid the balance amount from their PLA. – Held that:- When the entries were corrected in the Cenvat credit account and the differential amount was paid through PLA, the same would be refundable to the assessee – Decided in favor of Assessee. Issues:1. Interpretation of area-based exemption notification No. 56/2002 CE.2. Correctness of duty payment from Cenvat credit account.3. Rejection of refund claim due to payment method.4. Entitlement to refund of duty paid through PLA.Analysis:1. The judgment revolves around the interpretation of area-based exemption notification No. 56/2002 CE, which requires the manufacturing unit to pay Central Excise duty from their Cenvat credit account and then from PLA. The appellant mistakenly showed a higher Cenvat credit balance, leading to erroneous duty payment from PLA. The authorities rejected the refund claim based on the initial payment method. However, the appellant corrected the entries and paid the differential amount from PLA, seeking a refund for the same.2. The appellant's entitlement to the refund hinges on the correct adjustment of entries in the Cenvat credit account. Had the entries been accurate initially, the duty would have been paid through PLA, making the appellant eligible for a refund. The lower authorities acknowledged the duty paid against a negative Cenvat credit balance. Therefore, the correction of entries and subsequent payment through PLA should warrant the refund, irrespective of the initial payment source.3. The appellate authority's reasoning, which denied the refund due to the initial payment from the Cenvat credit account against a negative balance, is deemed unjustified. The subsequent correct payment through PLA rectified the error and fulfilled the duty payment requirement under the exemption notification. Consequently, the judgment sets aside the impugned order and grants the appeal with consequential relief to the appellant, affirming their entitlement to the refund of duty paid through PLA.This detailed analysis of the judgment highlights the issues surrounding the interpretation of the exemption notification, the correction of payment entries, the rejection of the refund claim, and the ultimate entitlement to the refund based on the correct payment method.