Re-credit of Cenvat amount after cash payment cannot be denied by insisting on a refund application in these facts.

Gujarat HC held that where an assessee had first used Cenvat credit and later paid the same liability in cash through PLA, the department could not insist on a refund application under Section 11B as the only remedy. In these facts, denying re-credit would leave the assessee having paid twice for the same liability. The Court treated the request not as an impermissible suo motu re-credit of unused credit, but as a consequential restoration of the debit entry after cash payment had been received by the department. The communication rejecting re-credit was therefore unsustainable, and re-credit in the electronic credit ledger was allowed.

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Issues: Whether, on the facts of the case, the assessee was entitled to re-credit of the amount paid through PLA after earlier debit from the Cenvat account, and whether the department was justified in insisting upon a refund application under Section 11B of the Central Excise Act, 1944 instead of sanctioning re-credit.

Analysis: The dispute arose after the assessee had initially utilized Cenvat credit and, pursuant to the earlier adjudication, later paid the same amount in cash through PLA. The Court held that the department could not retain the amount without restoring the corresponding credit, because the assessee had already suffered payment twice for the same liability. In these peculiar facts, a refund under Section 11B would not furnish an effective remedy, as it would merely return the amount in cash and perpetuate the same inequity that the assessee sought to avoid. The request was not treated as a claim for impermissible suo motu re-credit of unused credit, but as a consequential restoration of the debit entry after receipt of cash payment by the department.

Conclusion: The assessee was entitled to re-credit of the amount in the electronic credit ledger, and the communication rejecting such request was unsustainable.

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