2022 (12) TMI 1140 - AT - Central Excise

Tribunal denies refund claim, emphasizes tax scheme prevents credit monetization

The tribunal ruled against M/s Amar Tubes Pvt Ltd in their claim for refund of duty liability, restoration of credit, and monetization of credit. The ... Claim for monetization of the restored CENVAT credit as approved by the Hon’ble High Court of Karnataka in circumstances of closure of the factory of the appellant - operation of rule 8(3A) of Central Excise Rules, 2002 (as existing then) withdrawing privilege of consolidated payment at the end of each month as well as of discharge through CENVAT credit till the default is made good along with interest - HELD THAT:- The duty liability, on which CENVAT credit is availed, is nothing but the leviability discharged in accordance with section 3 of Central Excise Act, 1944 on clearances effected by the supplier - manufacturer and refund of that amount would be tantamount to negating the correctness of that levy. CENVAT Credit Rules, 2004 does not, for this reason, envisage any erosion of credit availed except by utilization towards duty liability under rule 3(4) thereof, by refund under rule 5 thereof or by recovery for ineligible availment under rule 14 thereof. To accede to the plea of the appellant herein would be to discard the leviability of duty/tax on manufacture/supply of goods/services procured by the appellant. The appeal lacks merit and, for that reason, is dismissed. Issues:Claim for refund of duty liability, restoration of credit, monetization of credit, applicability of rules, interpretation of legal precedents.Analysis:1. The case involves a claim for refund of duty liability by M/s Amar Tubes Pvt Ltd against an order-in-appeal by the Commissioner of Central Excise. The appellant had discharged duty liability twice due to central excise authorities' insistence, leading to a claim for refund. 2. The primary issue revolves around the restoration of credit and the claim for monetization of the restored CENVAT credit. The appellant argued that the delay in restoring credit prejudiced them, citing the decision in Union of India v. Slovak India Trading Co Pvt Ltd. However, the authorities rejected the application for monetization based on lack of evidence of factory closure.3. The legal dispute also delves into the interpretation of rule 8(3A) of the Central Excise Rules, 2002, which governs the discharge of duty liability. The appellant sought to rely on legal precedents such as Lloyds Steel Industries Ltd v. Union of India and Indsur Global Ltd v. Union of India to support their case.4. The tribunal examined the nature of the CENVAT credit scheme, emphasizing that it aims to prevent cascading effects of tax and ensure duty liability is borne by the ultimate consumer. The tribunal highlighted that the CENVAT credit rules do not allow monetization of credit in case of unutilized amounts.5. The judgment also references the decision of the Hon'ble High Court of Bombay in Gauri Plasticulture P Ltd v. Commissioner of Central Excise, Indore, which clarified that cash refund for unutilized credit is not permissible under the Central Excise Act. The tribunal dismissed the appeal, stating that allowing monetization of credit would negate the levy of duty/tax on manufactured goods.6. In conclusion, the tribunal ruled against the appellant, emphasizing that the appeal lacks merit and was dismissed. The judgment was pronounced on 21/12/2022.