Refund of excess excise duty must follow statutory claim procedure, and deliberate Cenvat credit misuse can attract penalty.

Excess excise duty cannot be adjusted suo motu against a demand; any refund or set-off must be pursued under Section 11B of the Central Excise Act, 1944 and remains subject to unjust enrichment and limitation. The adjustment was therefore impermissible. Wrongful availment and re-availment of Cenvat credit was treated as deliberate conduct rather than a clerical error, and the penalty on both the assessee and the director was upheld because the record supported their involvement. The appellate relief was set aside and the original adjudication restored.

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Issues: (i) Whether excess duty paid / wrong credit could be adjusted suo motu against the demand without resort to a refund claim under the excise law; (ii) whether penalty on the assessee and the director was justified for the wrongful availment and re-availment of Cenvat credit.

Issue (i): Whether excess duty paid / wrong credit could be adjusted suo motu against the demand without resort to a refund claim under the excise law.

Analysis: The adjustment of excess duty was found impermissible because refunds of duty have to be claimed under Section 11B of the Central Excise Act, 1944 and are subject to the requirement of unjust enrichment. The order permitting adjustment had also failed to examine limitation, although the claimed excess payment was prima facie time-barred. The finding on unjust enrichment was disapproved because the goods were sold on MRP basis, so the duty burden could not be treated as not recovered from the buyers.

Conclusion: The adjustment of excess duty was not permissible and the Revenue succeeded on this issue.

Issue (ii): Whether penalty on the assessee and the director was justified for the wrongful availment and re-availment of Cenvat credit.

Analysis: The same credit was wrongly taken, detected, and then taken again instead of being reversed, indicating deliberate conduct rather than a mere clerical mistake. The material on record also showed the director's involvement could not be ruled out, and the penalty provision was correctly invoked in relation to his role.

Conclusion: The penalties on the assessee and the director were upheld.

Final Conclusion: The appellate order was set aside and the original adjudication was restored, resulting in rejection of the reliefs granted to the respondents.

Ratio Decidendi: Any refund or adjustment of excess excise duty must be pursued under Section 11B of the Central Excise Act, 1944 and cannot be taken suo motu, and deliberate wrongful availment or re-availment of Cenvat credit attracts penalty.

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