CENVAT credit refund allowed as Rule 11(3) cannot apply retrospectively to pre-insertion exemption notifications

CESTAT Ahmedabad allowed the appeal for refund of CENVAT credit of Additional Duties of Excise (Textiles and Textile Articles) under ADE(TTA) Act, 1978. The tribunal held that Rule 11(3) of CENVAT Credit Rules, 2004 cannot be applied retrospectively to exemption notifications issued before its insertion, following SC precedent in Gokaldas Intimate Wear case. Previous rejection of refund claim under different provision (Rule 5) does not bar fresh claim under Section 142 of CGST Act, 2017. The accumulated credit became unutilizable after GST implementation, making refund the only remedy available to the appellant.

---

---

Issues Involved:
1. Applicability of Rule 11(3) of the CENVAT Credit Rules, 2004.
2. Rejection of the refund claim on the grounds of a previous rejection.

Summary:

Issue 1: Applicability of Rule 11(3) of the CENVAT Credit Rules, 2004

The Appellant, M/s. Ashima Limited, contended that the refund was denied by invoking Rule 11(3) of the CENVAT Credit Rules, 2004, which was introduced on 01.03.2007, whereas the goods were exempted from Additional Duties of Excise (Textiles and Textile Articles) ("ADE(TTA)") vide Notification No. 31/2004-CE dated 09.07.2004. Therefore, Rule 11(3) is not applicable retrospectively. The Tribunal agreed, citing the judgment in CCEx, Bangalore- II vs. Gokaldas Intimate Wear [2011 (70) ELT 351 (Kar.)], upheld by the Supreme Court, which held that Rule 11(3) cannot be applied retrospectively. The Tribunal concluded that the appellant's refund claim cannot be rejected by invoking Rule 11(3) of the CENVAT Credit Rules, 2004.

Issue 2: Rejection of the refund claim on the grounds of a previous rejection

The Appellant argued that the previous refund claim was filed under Rule 5 of the CENVAT Credit Rules, 2004, and was rejected due to non-compliance with the conditions of Rule 5. After this rejection, the accumulated CENVAT credit of ADE (TTA) was restored in their account and carried forward. With the introduction of GST, the accumulated credit could not be utilized, making the Appellant eligible for a refund u/s 142(3) of the CGST Act, 2017. The Tribunal agreed, stating that the previous rejection under Rule 5 does not create any embargo for processing the refund claim under Section 142 of the CGST Act, 2017. This view was supported by judgments in Kirloskar Toyota Textile Machinery Pvt. Limited vs. Commissioner of Central Tax, Bangalore, South GST - 2022 (379) ELT 256 (Tri-Bang.) and Nu vista Limited vs. Commissioner (Appeals), CGST - 2022 (381) ELT 681 (Tri. Delhi).

In conclusion, the Tribunal held that the appellant is eligible for the refund of accumulated CENVAT credit of ADE (TTA) in terms of Section 142 of the CGST Act, 2017 read with Section 11B of the Central Excise Act, 1944. The impugned order was set aside, and the appeal was allowed with consequential relief.

(Pronounced in the open court on 02.04.2024)

---