Area-based exemption refund cannot be denied where corrected accounts show actual PLA payment after a mistaken Cenvat entry.

Refund under an area-based exemption cannot be denied merely because duty was initially reflected as paid from Cenvat credit, where the accounting entry was later corrected and the differential amount was actually discharged through PLA. The text explains that, after the assessee corrected the mistaken credit balance, the duty stood paid through PLA, which is the relevant basis for refund eligibility under the notification. An erroneous initial entry does not defeat the refund claim when the corrected records and payment position satisfy the refund condition.

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Issues: Whether refund could be denied merely because the duty was initially shown as paid from the Cenvat credit account, when the entries were later corrected and the differential amount was actually paid through PLA.

Analysis: The unit was operating under the area based exemption notification, under which duty was to be discharged from Cenvat credit and, upon exhaustion of credit, from PLA, with the PLA-paid duty being refundable. The assessee had mistakenly reflected a higher Cenvat credit balance and, on correction of the accounts, paid the differential amount through PLA and claimed refund. The denial of refund on the ground that the amount had earlier been shown as paid from Cenvat credit was not justified, since the lower authorities had already accepted that the duty was in fact paid against a negative Cenvat credit balance and the corrected PLA payment satisfied the condition for refund.

Conclusion: Refund could not be denied on the basis of the initial accounting entry, and the issue was decided in favour of the assessee.

Ratio Decidendi: Where duty eligible for refund under an area based exemption is actually paid through PLA after correction of an erroneous credit entry, refund cannot be refused merely because the amount was shown as discharged from Cenvat credit.

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