2024 (12) TMI 222 - AT - Central Excise

Tribunal allows refund of Rs.5,27,132 cenvat credit reversal, rules unjust enrichment doesn't apply under Rule 6(3)(b)

Mangalore Refinery and Petrochemicals Limited Versus The Commissioner of Central Excise (Appeals), Mangalore

CESTAT Bangalore allowed the appeal regarding refund claim rejection. The appellant had reversed cenvat credit of Rs.5,27,132/- on inputs used for ... Refund claim - rejection on the ground that the appellant failed to establish that they reversed cenvat credit availed on common inputs utilised in the manufacture of Sulphur recovery unit - sufficient documentary evidences were not produced - violation of unjust enrichment - HELD THAT:- The refund claim was filed by the appellant subsequent to the decision of this Tribunal in the case of IOC Ltd. [2002 (12) TMI 656 - CEGAT, NEW DELHI], whereby this Tribunal has observed that Sulphur being a by-product emerges during the course of manufacture of final product, cannot be subjected to Rule 6(3)(b) of the Cenvat Credit Rules, 2002 and erstwhile Rule 57CC / 57AD(2)(b) of the Central Excise Rules, 1944. On rejection of the refund claim, the matter reached before this Tribunal and this Tribunal categorically held that refund is admissible to the appellant but remanded the matter to the adjudicating authority to examine the issue of unjust enrichment. Both the authorities below have travelled beyond the scope of the remand order of the Tribunal and both authorities re-examined the admissibility of credit on merit whereas observation of the Tribunal on merit was that 8% of the value of the Sulphur a by-product cannot be collected, which presupposes that proportionate cenvat credit availed on inputs had been reversed; and facts on record revealed that the appellant had reversed credit of Rs.5,27,132/-. No argument was advanced by the Revenue before the Tribunal that the said reversal was not correct. The direction of the Tribunal was that the issue of unjust enrichment be examined before sanctioning the refund. Further, it is found that the refund relates to cenvat credit reversed / paid pursuant to Rule 6(3)(b) of the Cenvat Credit Rules, 2002 and Rule 57CC / 57AD(2)(b) of the Central Excise Rules, 1944 on the Sulphur emerged as by-product - the principles of unjust enrichment could not be made applicable for the payment made under Rule 6(3)(b) of the Cenvat Credit Rules, 2002 and Rule 57CC / 57AD(2)(b) of the Central Excise Rules, 1944. Also on scrutiny of the relevant sample invoices for Sulphur for the period in dispute, it is noticed that the amount of 8% had not been recovered by the appellant from their customers. No contrary evidence has been referred to by the authorities below to rebut the said claim of the appellant. The impugned order is set aside - Appeal allowed. Issues:Admissibility of refund claim under Cenvat Credit Rules, 2002 and Central Excise Rules, 1944. Scope of remand order by Tribunal. Examination of unjust enrichment. Applicability of principles of unjust enrichment.Analysis:The appeal was filed against an Order-in-Appeal passed by the Commissioner of Central Excise, Mangalore. The appellant, engaged in the manufacture of petroleum products, availed cenvat credit on inputs used in the final product manufacture. They cleared Sulphur, a by-product, at NIL rate of duty, and reversed 8% of the sale value of Sulphur as per relevant rules. A previous Tribunal decision allowed the appellant to claim benefit of Rule 57AD, leading to a refund claim of Rs.1,17,14,846. The refund claim was initially rejected based on unjust enrichment and failure to establish credit reversal on common inputs. The case was remanded for unjust enrichment examination. The appellant contended that the findings on credit reversal went beyond the remand scope. They presented evidence of credit reversal and argued against the applicability of unjust enrichment principles. The Revenue supported the lower authorities' findings.The main issue was the admissibility of the refund claim following the Tribunal's previous decision. The Tribunal had earlier held that Sulphur being a by-product did not require 8% reversal, remanding only for unjust enrichment scrutiny. Both lower authorities re-examined credit admissibility, contrary to the Tribunal's focus on non-collection of 8% value, indicating credit reversal. The Tribunal found the appellant had reversed credit and that the refund related to Cenvat Credit Rules, exempting it from unjust enrichment principles. Precedents were cited to support this exemption. The invoices showed non-recovery of 8% from customers, unchallenged by contrary evidence.In conclusion, the Tribunal set aside the impugned order, allowing the appeal with consequential relief as per law.