2017 (2) TMI 204 - AT - Central Excise

Tribunal allows appeal, affirms suo motu credit validity, no refund claim needed under Central Excise Act.

The Tribunal set aside the impugned order and allowed the appeal, ruling that the appellant's suo motu credit was valid and did not necessitate a refund ... Reversal of cenvat credit - Suo motu credit of the CENVAT credit - Loss of stock due to fire - Interest - Penalty - Hon'ble High Court of Karnataka in the case of Motorola India Pvt. Ltd. [2006 (7) TMI 223 - HIGH COURT OF KARNATAKA AT BANGALORE] on the issue of availment of suo motu credit held as under The Tribunal, after noticing the material facts has chosen to allow the claim on the basis that the amount paid by mistake cannot be termed as duty in the case on hand. Hon'ble High Court of Madras in the case of ICMC Corporation Ltd. [2014 (1) TMI 1473 - MADRAS HIGH COURT] on the issue of availing of suo motu credit held as under Held that:- assessee originally availed the Cenvat Credit on service tax for discharging its liability. However, for sound reasons, it reversed the credit. Strictly speaking, in this process, there is only an account entry reversal and factually there is no outflow of funds from the assessee to result in filing application under Section 11B of the Central Excise Act, 1944 claiming refund of duty. Appeal allowed. Issues Involved:1. Confirmation of demand under Section 11A of the Central Excise Act, 1944.2. Imposition of interest under Section 11AB of the Central Excise Act, 1944.3. Imposition of penalty under Rule 15 of the CENVAT Credit Rules, 2004.4. Legality of taking suo motu credit without filing a refund claim under Section 11B of the Central Excise Act, 1944.Issue-wise Detailed Analysis:1. Confirmation of Demand under Section 11A of the Central Excise Act, 1944:The appellants faced a demand of Rs. 88,187/- confirmed by the Assistant Commissioner, Central Excise, due to the destruction of inputs and raw materials in a fire incident on 1st February 2005. The credit was reversed upon audit on 14.03.2006. The demand was confirmed under Section 11A of the Central Excise Act, 1944, read with Rule 14 of the CENVAT Credit Rules, 2004.2. Imposition of Interest under Section 11AB of the Central Excise Act, 1944:Interest amounting to Rs. 12,798/- was imposed under Section 11AB of the Act due to the delayed reversal of CENVAT credit. The appellants did not initially pay the interest, leading to a show-cause notice and subsequent adjudication.3. Imposition of Penalty under Rule 15 of the CENVAT Credit Rules, 2004:A penalty of Rs. 2,000/- was imposed under Rule 15 of the CENVAT Credit Rules, 2004. The penalty was part of the adjudication process following the show-cause notice issued for the recovery of interest.4. Legality of Taking Suo Motu Credit Without Filing a Refund Claim under Section 11B of the Central Excise Act, 1944:The appellants took suo motu credit of the CENVAT credit following the Order-in-Appeal, which was contested by the department. The first appellate authority dismissed the appeal, citing the Larger Bench decision in BDH Industries Limited and the Tribunal's decision in Comfit Sanitary Napkins (I) Pvt. Ltd., which held that all refunds must be filed under Section 11B, and no suo motu credit can be taken without applying for a refund.The appellants relied on the Tribunal's decision in Prempreet Textile Industries Ltd., where deposits made during investigations were treated as pre-deposits. However, the appellate authority found this inapplicable as no such order was passed treating the amount as a pre-deposit in the present case.The judgments in Jindal Vijaynagar Steel Ltd. and Bajaj Auto Ltd. were also found inapplicable as they pertained to the issue of limitation and involved cases where refund claims were filed, unlike the present case where the appellant took suo motu credit.Judicial Pronouncements and Final Decision:The Tribunal referenced the Karnataka High Court's decision in Motorola India Pvt. Ltd., which held that amounts paid by mistake cannot be termed as duty, and time bar does not apply. Similarly, the Madras High Court in ICMC Corporation Ltd. held that for account entry reversals, Section 11B does not apply as there is no outflow of funds, and unjust enrichment does not arise.The Tribunal followed these precedents, noting that the appellants made a case on merits. The Tribunal cited additional decisions such as Sopariwala Exports Pvt. Ltd. and Jayaswal Neco Industries Ltd., which supported the appellant's position.Conclusion:The Tribunal set aside the impugned order and allowed the appeal with consequential reliefs, if any. The judgment emphasized that the suo motu credit taken by the appellant was valid and did not require a refund claim under Section 11B of the Central Excise Act, 1944, aligning with the judicial pronouncements cited.Pronouncement:The judgment was pronounced in court on 18.01.2017.