Cenvat credit refund where departmental insistence forced cash duty payment and the credit could not be re-credited

Where revenue insists on duty payment in cash through PLA despite available Cenvat credit, the corresponding unutilised credit may be refunded in cash if it cannot later be re-credited. The tribunal treated the assessee's cash payments, made on departmental insistence even though credit balance was available, as comparable to the recognised restitution principle that credit blocked by revenue action should not be denied return. In the absence of any express bar, fairness required restoration of the amount lying in the Cenvat account, and consequential relief followed because the final product had later become fully exempt.

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Issues: Whether the assessee was entitled to cash refund of accumulated Cenvat credit where duty had been paid in cash through PLA on departmental insistence and the final product later became fully exempt.

Analysis: The assessee consistently maintained that it had sufficient Cenvat balance but was required by the excise authorities to make payments in PLA for revenue mobilisation, and the record showed fixed cash payments during the relevant months despite available credit. The facts were held to be comparable to the Larger Bench view that where credit cannot be utilised because of departmental objection or insistence, and duty is paid in cash instead, the assessee should not be denied restitution of the corresponding credit. The reasoning proceeded on the basis that there is no express bar to such refund and that fairness requires restoration when the assessee was prevented from using the credit otherwise available for duty payment.

Conclusion: The assessee was held entitled to cash refund of the amount lying in Cenvat credit account, with consequential relief.

Ratio Decidendi: Where an assessee is prevented by the revenue from utilising otherwise available Cenvat credit and consequently pays duty in cash or through PLA, the corresponding credit becomes refundable in cash if it cannot be re-credited for future use.

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