2014 (7) TMI 653 - AT - Central Excise

Manufacturer wins refund claim after opting for exemption under notification, entitled to reversed duty credit refund

Commissioner of Central Excise Chandigarh Versus M/s. International Cylinders Pvt. Ltd.

The appellant, engaged in manufacturing metal containers, LPG cylinders, and related components, opted for exemption under notification No. 50/2003 dated ... Exemption notification No. 50/2003 dated 10.6.03 - Reversal of CENVAT Credit - Subsequent refund claim of the credit so reversed under protest - Commissioner allowed refund claim - Held that:- even though the final product may be exempt from payment of excise, the assessee cannot be asked to reverse the Modvat credit already taken by it - as per the law, as it stood during the relevant time, the appellant was neither required to reverse the credit, nor could he utilize the same. The unutilized credit could remain unutilized in their books of account - Following decision of CCE, Chandigarh vs. Saboo Alloys Pvt. Ltd. reported as [2009 (12) TMI 125 - HIGH COURT OF HIMACHAL PRADESH]. Eligibility of the appellant for refund of the amount already reversed by them - Held that:- appellant are indeed entitled to the refund of the said amount of ₹ 9,29,288/-, if otherwise in order. Further, this amount otherwise refundable, is to be refunded only by way of recredit to their Cenvat account as it pertained to the duty paid on the inputs lying in stock or in process or contained in final products lying in stock with the appellant as on 28.11.2003. This amount cannot be refunded to the appellant in cash - Decided against Revenue. Issues:1. Whether the appellant was required to reverse the credit of duty on goods lying in stock upon opting for exemption under notification No. 50/2003 dated 10.6.03.2. Whether the appellant is eligible for a refund of the amount reversed by them.Analysis:1. The appellant, engaged in manufacturing metal containers, LPG cylinders, and related components, opted for exemption under notification No. 50/2003 dated 10.6.03. Central Excise officers advised them to reverse the credit of duty on goods in stock as of 28.11.03. The appellant reversed the credit under protest and later filed a refund claim, contending they were not required to reverse it. The original adjudicating authority rejected the claim, but the Commissioner (Appeals) allowed it citing Tribunal decisions and Supreme Court rulings. The Commissioner held that the appellant was not obligated to reverse the credit upon opting for exemption, as Rule 6(1) did not apply, and Rule 9(2) was inapplicable since the exemption was not based on annual clearances. The Commissioner also noted that Rule 11(3) did not apply retrospectively. The High Court of Himachal Pradesh decision in CCE vs. Saboo Alloys Pvt. Ltd. supported the appellant's position, emphasizing that even if the final product was exempt, the credit need not be reversed. The Commissioner found no requirement for credit reversal, and the unutilized credit could remain on the books.2. The second issue addressed the eligibility of the appellant for a refund of the reversed amount. The appellant had reversed an amount attributable to duty paid on goods in stock as of 28.11.03 upon opting for full exemption. The Commissioner held that the appellant was entitled to a refund of this amount, to be recredited to their Cenvat account, as it pertained to duty paid on goods in stock. The refundable amount could not be refunded in cash. The Revenue contended that certain decisions were not applicable to the case, but the Commissioner found no infirmity in the appellate authority's decision, which followed the Larger Bench decision and the Himachal Pradesh High Court ruling in Saboo Alloys Pvt. Ltd. The Revenue's appeal was rejected, upholding the Commissioner's decision.This detailed analysis of the judgment outlines the issues, the arguments presented, and the legal reasoning behind the decision, providing a comprehensive understanding of the case and its implications.