2025 (10) TMI 449 - AT - Central Excise

Refund claim for differential duty and interest denied where CENVAT Credit Rules, 2004 applied and liability not appealed

M/s Albert David Ltd. Versus Commissioner of Central Excise & Service Tax, Ghaziabad

CESTAT Allahabad (AT) dismissed the appellant's refund claim for differential duty and interest on clearances of IV fluids. The tribunal found the ... Refund of amount of differential duty and interest thereon - clearances of Intravenous Fluids - appellant was clearing I.V. Fluids, on payment of the duty, during the period for which they filed this refund claim and were taking the CENVAT credit of the inputs and input services - non-entitlement of lower rate of duty, as per notification No 1/2011 dated 01.03.2011 (S No 38), as credit was availed - HELD THAT:- The decision of the Hon’ble Allahabad High Court in the appellant own case [2013 (8) TMI 66 - ALLAHABAD HIGH COURT] is not on the issue in dispute. The issue under consideration in the said decision was with regards to the erstwhile Modvat Credit Scheme as per the Central Excise Rules, 1994 as they existed then. Hon’ble High Court has itself observed against the applicability of the provisions of CENVAT Credit Rules, 2004, while determining the admissibility of credit in respect of the inputs, by treating waste and scrap of plastic granules as dutiable product. The appeal filed by the revenue against this order of High Court has been dismissed by the Hon’ble Supreme Court [2014 (4) TMI 508 - SC ORDER]. As the present dispute is for the period during which the CENVAT Credit Rules, 2004 were in force and the appellant was operating in terms of the said rules, this decision would not be a binding precedent. There are no binding precedent, in respect of the case of refund under consideration. We find that appellant has paid the duty (including differential duty) in respect of the clearance of the I V Fluids, by availing the CENVAT credit on the inputs and input services. Impugned order records specific finding in this regard. The appellant has sought the refund of the duty paid by them, voluntarily or as instructed by the departmental officers, and have not challenged the levy of the duty so assessed by way of any appeal before the appellate authority and have not produced any appellate decision setting aside the liability so assessed and paid. When the decision of the Hon’ble Supreme Court, itself records the facts of Central Excise Case, while making the order can it be said that the law declared by the Hon’ble Supreme Court in that case is not applicable to the refund claim made in terms of Section 11B of Central Excise Act, 1944. The dispute in case of Shree Balaji Warehouse [2023 (9) TMI 1478 - CESTAT CHANDIGARH (LB)], decided by the larger bench of tribunal, and referred by the Counsel was in respect of the applicability of the said decision to the service tax matters. Although the larger bench decided against the applicability of the said decision to the refunds under Chapter V of Finance Act, 1994 (Service Tax refunds), Hon’ble Delhi High Court has subsequently taken a contrary view in case of BT India Pvt. Ltd. [2023 (11) TMI 478 - DELHI HIGH COURT]. Thus there are no merits in the submissions made on this account. As it is found that the law as declared by the Hon’ble Apex Court is binding on all the courts as per Article 141 of the Constitution of India, there are no merits in this appeal filed by the appellant. Appeal dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether refund of differential excise duty and interest is admissible under Notification No. 01/2011-CE where the assessee had availed CENVAT credit on inputs and input services used in manufacture of the final product but undertook reversal of a portion of that credit (relating to plastic waste and scrap) after clearance or upon departmental insistence. 2. Whether reversal of CENVAT credit after initial availment, but prior to utilization, qualifies as non-availment for the purpose of the proviso to Notification No. 01/2011-CE (i.e., to secure concessional duty) and thus supports a refund claim of duty paid at full tariff rate. 3. Whether decisions in the assessee's earlier proceedings (High Court/Tribunal/Supreme Court in related matters concerning waste/scrap and credit) bind the present refund claim where the factual/legal matrix differs (periods governed by CENVAT Credit Rules, 2004 and the notifications at issue). 4. Whether refund proceedings can be used to re-open or re-adjudicate assessment/self-assessment orders that were not appealed, in light of settled principles on finality of assessment and scope of refund provisions (including doctrines in Supreme Court decisions on refund claims and limitation). 5. Whether interest on delayed refund is payable where refund is found admissible. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Admissibility of Refund where CENVAT Credit Was Availed and Partly Reversed Legal framework: Notification No. 01/2011-CE grants concessional rate subject to proviso that it shall not apply where credit of duty on inputs or tax on input services has been taken under CENVAT Credit Rules, 2004. Refund of duty collected contrary to law is governed by the refund provisions of the Central Excise Act (Section 11B/Rule 11 analogues applied by courts). Precedent treatment: The Court reviewed prior decisions addressing whether reversal of credit before utilization equates to non-availment (including decisions where reversal was treated as tantamount to non-availment and cases where differing statutory regimes applied). It also considered Tribunal/High Court/Supreme Court rulings in the assessee's own earlier matters but found factual and legal distinctions. Interpretation and reasoning: The Tribunal found the undisputed fact that during the claim period the assessee availed CENVAT credit on inputs and input services and cleared IV fluids after taking such credit. The assessee had only reversed CENVAT credit corresponding to LDPE granules contained in waste/scrap cleared on payment of duty (partial reversal) and gave an undertaking to reverse further credit upon receipt of refund. The Tribunal reasoned that the proviso to Notification No. 01/2011 precludes concessional rate where any credit has been taken; a mere undertaking to reverse post-facto does not satisfy the condition at the relevant time. The Tribunal emphasized that refund proceedings are not the forum to re-adjudicate entitlement to concessional rate; the original assessment/self-assessment stands unless challenged and set aside by appellate process. Ratio vs. Obiter: Ratio - where CENVAT credit was availed and not effectively reversed before utilization for the period in question, the provision's condition is not satisfied and refund of differential duty is not admissible. Obiter - implications of circulars and some earlier divergent decisions on reversal-before-utilization were discussed but not treated as controlling where facts differ. Conclusion: Refund claim rejected on ground that the appellant had availed CENVAT credit and had not reversed the full corresponding credit prior to or contemporaneous with clearances; partial reversal and later undertaking were insufficient to meet the proviso to Notification No. 01/2011. Issue 2 - Effect of Reversal Before Utilization: Does Reversal Equate to Non-Availment? Legal framework: CENVAT Credit Rules, 2004 and interpretations by circulars and judicial pronouncements concerning reversal before utilization (the proposition that reversal before utilization is tantamount to not having taken credit). Precedent treatment: The Court examined authorities holding that reversal before utilization can be treated as non-availment (including Tribunal circular-based reasoning and some High Court/Supreme Court treatment in old-modvat contexts), but distinguished those authorities where the statutory regime or factual circumstances (periods prior to CENVAT Rules 2004 or where full reversal actually took place before utilization) differed from the instant case. Interpretation and reasoning: The Tribunal accepted the proposition in principle but found it inapplicable on facts because reversal was partial (limited to LDPE waste/scrap) and other CENVAT credits on inputs and services remained availed and un-reversed during the relevant clearances. The Tribunal further noted that reversal by way of an undertaking after payment or conditional reversals do not retroactively make the proviso inapplicable for the period when credit was in fact taken and used. Ratio vs. Obiter: Ratio - reversal before utilization can equate to non-availment only where credit is actually reversed prior to utilization and the factual matrix supports that conclusion; abstract propositions or circulars cannot override the concrete record of availment and partial reversal. Obiter - references to earlier judgments treating reversal as non-availment where facts were different. Conclusion: On the facts, reversal-before-utilization doctrine did not assist the appellant because the requisite effective reversal of all relevant credits before utilization was not established. Issue 3 - Binding Effect of Earlier Judicial Decisions in Related Proceedings Legal framework: Principle of stare decisis and binding effect of Supreme Court decisions (Article 141); precedential weight of Tribunal and High Court decisions; applicability depends on congruence of facts and governing statutory regime. Precedent treatment: The Tribunal reviewed the assessee's own earlier High Court and Tribunal decisions and the Supreme Court's affirmation in a related matter but concluded those decisions addressed different legal regimes or factual matrices (e.g., disputes predating CENVAT Credit Rules, 2004 or addressing modvat rules), and thus were not binding for the present refund claim. Interpretation and reasoning: The Tribunal held that where earlier rulings concern different legal provisions or time-periods, they do not automatically decide the present issue. The Supreme Court's decisions on refund law are binding; the Tribunal applied Supreme Court dicta on finality of assessment and non-reopening through refund claims to the facts. Ratio vs. Obiter: Ratio - earlier favourable decisions in distinct factual/regulatory contexts do not control a refund claim when the present period is governed by different statutory rules and facts. Obiter - observations comparing factual contexts. Conclusion: Earlier decisions cited by the appellant do not entitle it to refund in the present factual and legal context; binding Supreme Court principles on refund/finality do apply. Issue 4 - Scope of Refund Proceedings: Re-opening Assessments and Finality Legal framework: Supreme Court jurisprudence on refund claims (finality of assessment orders; requirement to challenge assessment by appeal rather than seek re-adjudication via refund), statutory provisions on refund and appeals; the rule that refund process is execution-like and not a substitute for appeal/reaudit. Precedent treatment: The Tribunal relied on Supreme Court authority that a party cannot ignore an appealable assessment order and later seek refund to overturn it; refund proceedings are not for re-assessment and cannot be used to reopen concluded assessments unless the assessment is modified/reversed by competent appellate/revisional process. Interpretation and reasoning: Given that the assessee did not challenge the underlying assessment/adjudication that led to duty being payable (and the fact of CENVAT availment was recorded and not set aside in appeal), the Tribunal held that refund provisions cannot be invoked to re-open an appealable order. The Tribunal applied the principle that the finality of proceedings cannot be undermined by subsequent judicial decisions in other cases unless the order in the assesseee's own case is set aside by appropriate remedy. Ratio vs. Obiter: Ratio - refund cannot be used to re-adjudge or overturn an appealable assessment order that was not contested; claimants must use appeal/review routes to alter assessment before claiming refund on that basis. Obiter - corroborative discussion of related authorities and legislative provisions. Conclusion: Refund claim cannot succeed where it effectively seeks to relitigate an appealable assessment which was not appealed or modified; the claim must fail on this ground as well. Issue 5 - Interest on Delayed Refund Legal framework: Provisions providing for interest on delayed refunds under the Central Excise Act (Section 11AA/11BB cited by parties) and judicial precedents awarding interest where refund is held admissible. Precedent treatment: The Tribunal noted authorities supporting interest entitlement on valid refund awards but did not reach a positive adjudication on interest because the primary refund claim was dismissed on substantive grounds. Interpretation and reasoning: As refund itself was held not admissible, the ancillary plea for interest could not succeed; interest would be payable only if refundable duty is established to be refundable under law and procedure. Ratio vs. Obiter: Ratio - interest follows only where refund is legally adjudged; not applicable where refund is rejected. Obiter - citations to cases where interest was awarded when refund allowed. Conclusion: No entitlement to interest arises because the substantive refund claim was dismissed. Overall Conclusion The Tribunal dismissed the appeal: refund of differential duty and interest was not admissible because the assessee had availed CENVAT credit on inputs and input services during the period in question and had not effectively reversed the full corresponding credit prior to utilization; earlier decisions relied upon by the assessee were inapplicable on facts or legal regime; refund proceedings cannot be used to re-open appealable assessment orders that were not challenged; consequently the refund claim and interest prayer were rejected.