Tribunal grants refund of Cenvat credit, finding denial unjust. Practical challenges considered.

The Tribunal allowed the appeal filed by M/s. Koshambh Multitred Private Limited, overturning the denial of refund of Cenvat credit. The Tribunal found the rejection of the refund claim based on the substantial utilization of credit during the dispute period to be arbitrary and unverified. Emphasizing the practical challenges faced by the appellant in holding onto credit for 16 years, the Tribunal held that the appellant was entitled to a refund of the remaining balance amount arising from the export of goods. The impugned order was set aside, and the appeal was allowed with consequential relief on 05.06.2020.

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Issues: Denial of refund of Cenvat credit

Analysis:
The appeal was filed against the denial of refund of Cenvat credit by M/s. Koshambh Multitred Private Limited. The appellant, a trader of taxable goods, had opted for Central Excise registration as they were getting goods manufactured from their job workers. A refund claim was filed for a specific amount before the Adjudicating Authority, which was later reduced due to utilization of the credit during the litigation period. The main contention was whether the appellant was entitled to a refund of the remaining balance amount arising from the export of goods, as covered under Rule 5 of Cenvat Credit Rules, 2004.

The Tribunal observed that the refund rejection was solely based on the substantial utilization of credit during the dispute period, assuming further utilization that might have reduced the credit to nil. This observation was deemed baseless and unconvincing as the facts were not verified by the Commissioner (Appeals). The impugned order referred to Condition 5 of the Appendix, which prohibits refund if the credit was continuously utilized without blocking it at the time of filing the refund claim. However, the Tribunal found this rejection arbitrary and presumptive, considering the long duration of the litigation (16 years) and the practical challenges faced by the assessee in holding onto credit for such an extended period.

The Tribunal emphasized that Condition 5 of the Notification No. 11/2002-CE (NT) did not imply that the appellant should not utilize the credit at all. Rather, it should be interpreted to allow a refund if the assessee is unable to utilize the Cenvat credit within a reasonable period. Consequently, the impugned order was set aside, and the appeal was allowed with consequential relief. The decision was pronounced in open court on 05.06.2020.

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