2024 (4) TMI 108 - AT - Central Excise

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. ... Refund of CENVAT Credit of Additional Duties of Excise (Textiles and Textile Articles) (ADE(TTA)) as per Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 - denial on the grounds that the Appellant is not eligible for CENVAT Credit as per Rule 11(3) of the CENVAT Credit Rules, 2004 - rejection also on the ground that the refund claim for the same amount was rejected in the past. Denial on the ground that credit of Additional Duty of Excise ADE (TTA) was lapsed in terms of Rule 11 (3) of Cenvat Credit Rules, 2004 - HELD THAT:- It is found that the appellant availed the exemption from ADE (TTA) in respect of their finished product vide Notification No. 31/2004 dated 09.07.2004 at that time Rule 11 (3) of Cenvat Credit Rules, 2004 was not in force whereas the same came into force on 01.03.2007 vide Notification No. 10/2007 – CE (NT), therefore, the provisions of Rule 11 (3) cannot be applied retrospectively in respect of exemption Notification No. 31/2004- CE - issue decided in the case of COMMISSIONER OF C. EX., BANGALORE-II VERSUS GOKALDAS INTIMATE WEAR [2011 (4) TMI 1123 - KARNATAKA HIGH COURT] upheld by the Hon’ble Supreme Court in COMMISSIONER VERSUS GOKALDAS INTIMATE WEAR [2016 (3) TMI 1391 - SC ORDER], it is settled law that the provisions of Rule 11 (3) of Cenvat Credit Rules, 2004 shall not apply in respect of the exemption notification which was issue prior to insertion of Rule 11(3). Therefore, in the present case also, the refund claim cannot be rejected by invoking Rule 11(3) of Cenvat Credit Rules, 2004 - decided in favour of appellant. Rejection on the ground that the refund claim for the same amount was rejected in the past - HELD THAT:- The appellant had filed the refund claim under altogether different provision i.e. Rule 5 and notification issued thereunder. The refund claim was rejected for non compliance of the condition of Rule 5 and notification thereof. Once the refund claim was rejected under Rule 5, the accumulated Cenvat credit of ADE (TTA) stands restored in the appellant’s Cenvat account and the same can be utilized in future but in the present case since the appellant could not utilize the same and due to the introduction of GST with effect from 01.07.2017, the accumulated credit of ADE (TTA) cannot be utilized by the appellant. The only remedy is to claim the refund under Section 142 of CGST Act, 2017. Therefore, the rejection of refund in the past under Rule has no relevance and does not create any embargo for processing the refund claim which is otherwise admissible to the appellant in terms of Section 142 of CGST Act, 2017 - reliance can be placed in the case of KIRLOSKAR TOYOTA TEXTILE MACHINERY PVT. LTD. VERSUS COMMISSIONER OF CENTRAL TAX, BENGALURU SOUTH GST COMMISSIONERATE [2021 (8) TMI 818 - CESTAT BANGALORE] where it was held that refund can be granted of the cesses viz. Education Cess and Higher Education Cess which could not be transitioned into GST - In view of the above judgment, the appellant, being also on the same footing, claiming the refund of accumulated ADE (TTA) are eligible for refund. The appellant are eligible for the refund of accumulated Cenvat credit of ADE (TTA) in terms of Section 142 of the CGST Act, 2017 read with Section 11 B of Central Excise Act, 1944 - the impugned order is set aside - Appeal allowed. 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, 2004The 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 rejectionThe 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)