Revenue neutrality barred recovery of an earlier excise refund after later use of accumulated CENVAT credit.

Retrospective amendment of area-based excise exemption and CENVAT credit rules did not justify recovery of an earlier refund where the assessee later fully utilised accumulated CENVAT credit. The Tribunal applied revenue neutrality and held that, once the later utilisation neutralised the higher refund for the earlier period, no enduring excess benefit remained to support demand under Section 153(4) of the Finance Act, 2003. The impugned order was therefore set aside and the appeal was allowed with consequential relief.

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Issues: Whether the demand and recovery of refund under Section 153(4) of the Finance Act, 2003 could be sustained when the assessee had subsequently utilized the accumulated CENVAT credit and no excess refund remained unrecovered.

Analysis: The appeal concerned an area-based excise exemption under Notification No. 32/99-CE, later amended retrospectively by Notification No. 61/2002-CE and corresponding changes to Rule 3 of the CENVAT Credit Rules, 2002 through the Finance Act, 2003. The material question was whether the earlier refund, which was initially sanctioned when duty was paid through PLA, could still be recovered despite the assessee having later exhausted the accumulated CENVAT credit and thereby neutralised the higher refund that had arisen for the earlier period. The Tribunal applied the principle of revenue neutrality and followed its earlier decision on identical facts, holding that once the accumulated credit was later utilised, the overall position did not result in any enduring excess benefit to the assessee.

Conclusion: The demand was not sustainable and the impugned order was set aside. The appeal was allowed with consequential relief.

Ratio Decidendi: Where accumulated CENVAT credit is later fully utilised so that the earlier excess refund is neutralised in the overall tax position, recovery under a retrospective amendment is not justified on the ground of an alleged excess refund for the earlier period.

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