Suo motu Cenvat re-credit upheld where rebate entitlement was undisputed and recovery notice was quashed.

Suo motu re-credit of Cenvat credit during pending revision was upheld on the peculiar facts, even though no specific statutory provision authorised such re-credit. The HC noted that the rebate claims under Rule 18 of the Central Excise Rules, 2002 read with Section 11B of the Central Excise Act, 1944 had been rejected, but the underlying rebate entitlement was not disputed and the authorities had been informed before the credit was taken. Given the prolonged uncertainty and the cited precedent on technical reversal of credit, the re-credit was treated as justified and not as a general precedent. The communication directing immediate payment and recovery was quashed.

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Issues: Whether the petitioners' suo motu re-credit of Cenvat credit, taken during the pendency of the revision proceedings, could be sustained and whether the consequential communication directing immediate payment and recovery was liable to be quashed.

Analysis: The dispute arose from rebate claims filed under Rule 18 of the Central Excise Rules, 2002 read with Section 11B of the Central Excise Act, 1944. The petitioners, a 100% Export Oriented Unit, had their rebate claims rejected and thereafter pursued revision, but the revision remained pending for a long period. The Court noted that there is no specific statutory provision authorising suo motu re-credit in the Cenvat account, yet on the admitted facts the rebate entitlement itself was not disputed and the petitioners had informed the authorities before taking the credit. The Court also considered the cited precedent on technical reversal of credit and held that, in the peculiar facts of the case, the petitioners' action was justified to resolve the prolonged uncertainty and not to be treated as a precedent.

Conclusion: The suo motu credit was approved, and the impugned communication demanding payment and recovery was quashed.

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