Brief Facts of the Case
The appellant availed CENVAT credit on input and capital goods. On a visit of the Central Excise officers, Preventive Unit, Thane – I on 20/02/2007, on their insurance, the appellant have reversed CENVAT credit of Rs.1, 70,737/- on 12/03/2007. Subsequently, neither any query was raised by the department nor any show cause notice was issued. Therefore, the appellant took re-credit of the said amount on 07/05/2007. For this re-credit a show because notice dated 09/07/2007 was issued proposing disallowance of the said re-credit, demand of interest under Section 11AB and penalty under Rule 15 of the CENVAT Credit Rules, 2004. In adjudication, the adjudicating authority has confirmed the demand along with interest and penalty. Aggrieved by the said order, an appeal was preferred by the appellant before the Commissioner (Appeals), who upheld the order-in-original. Aggrieved by the said impugned order the appellant appealed before Hon’ble CESTAT, Mumbai.
Contentions of the Appellant
The appellant contended that CENVAT credit was denied on the ground that for taking re-credit no document is available. The appellant submitted that re-credit is nothing but the reversal of the debit made at the instance of the departmental officers. Though the departmental officers got this amount debited, but later on no dispute was raised about the admissibility of the said credit. Therefore, the appellant correctly took re-credit of the said amount in their CENVAT credit account. The re-credit is nothing but as good as fresh CENVAT credit availed in accordance with CENVAT credit Rules. It is only a book entry, though for the time being the amount was debited at the instruction of the departmental officers. However, when no demand or show cause notice was issued in respect of the said reversal amount, CENVAT credit of the said amount stand admissible to the appellant and, therefore, they have re-credited the same. In support, the appellant placed reliance on the following judgments:
- ICMC Corporation Ltd. vs. CESTAT 2014 (302) ELT 45 (Mad.);
- Sopariwala Exports Pvt. Ltd. vs. Commissioner of Central Excise 2013 (291) ELT 70 (Tri. – Ahmd);
- Bodal Chemicals Ltd. vs. Commissioner of Central Excise, Ahmedabad-I 2013 (291) ELT 399 (Tri.-Ahmd);
- Lark Wires & Infotech Ltd. vs. Commissioner of Central Excise & Customs, Vadodara – II 2008 (254) ELT 154 (Tri.-Ahmd);
Contentions of the Revenue
The Revenue contended that re-credit of CENVAT credit is not permissible, as held in various following judgments:
- BDH Industries Ltd. vs. Commissioner of Central Excise 2008 (229) ELT 364 (Tri. – LB)
- Commissioner of Central Excise, Pune – I vs. Sunil Industries (P) Ltd. – 2014-TIOL-1379-CESTAT-MUM;
- Commissioner of Central Excise, Kolhapur vs. Parvati Agro Plast – 2013-TIOL-1563-CESTAT-MUM;
- Matrix Laboratories vs. Commissioner of Central Excise, Hyderabad – 2012-TIOL-1297-CESTAT-BANG;
- New Allenberry Works vs. Commissioner of Central Excise, Kolkata -V – 2012-TIOL-1297-CESTAT-BANG;
- BDH Industries Ltd. vs. Commissioner of Central Excise 2008 (231) ELT 61 (Tri.-Mum);
- Titawi Sugar Complex vs. Commissioner of Central Excise, Meerut-I 2009 (247) ELT 519 (Tri.-Del.)
Held By Hon’ble CESTAT, Mumbai
The Hon’ble CESTAT stated that, in the present case, the re-credit is not against any amount of duty payment. It is admittedly re-credit of an amount of CENVAT credit debited at the instruction of the officers. The amount of debit which was made earlier was legally admissible as CENVAT credit to the appellant. Because of the reversal at the instance of the departmental officers, on which the revenue has not raised any dispute on admissibility, re-credit the same by the appellant cannot be faulted with. As per the judgment relied upon by the appellant, (ICMC Corporation Ltd. vs. CESTAT 2014 (302) ELT 45 (Mad.)), the Hon’ble Madras High Court has held as under:
“13. We do not subscribe to the view expressed by the Revenue. Admittedly, the assessee originally availed the Cenvat Credit on service tax for discharging its liability. However, for sound reasons, it reversed the credit. Strictly speaking, in this process, there is only an account entry reversal and factually there is no outflow of funds from the assessee to result in filing application under Section 11B of the Central Excise Act, 1944 claiming refund of duty. The contention of the Revenue that even in reversal of the entry there is bound to be an unjust enrichment has no substance or based on any legal principle, since, what is availed off by the assessee is only a credit on the duty paid on the services rendered. Further, the assessee is entitled to take note of as per Rule 6(5) of the Cenvat Credit Rules, 2004, as there is no dispute of the fact that a sum of Rs.3,21,308/- available as Cenvat Credit was in respect of input services, which are given under Rule 6(5) of the Cenvat Credit Rules, 2004. When that being the case, in respect of those services specifically mentioned under Rule 6(5) of the Cenvat Credit Rules, 2004 as it existed during the relevant period viz., 2004-2006 getting the reversal of the entry is in tune with its stand taken, which was accepted by the Tribunal in the earlier round of litigation.
14. We do not find any good ground to hold that it was a case of refund of duty falling under Section 11B of the Central Excise Act, 1944 and that the assessee was to comply with the provisions of Section 11B of the Act. The view of the Tribunal that the assessee should seek reversal in the appropriate judicial forum, if the assessee was aggrieved by the earlier order herein does not arise at all.
15. Even a cursory reading of the order of the Tribunal in the earlier round of litigation would show that it accepted the assessee’s case of suomotu reversal of the entry. That being the case, the subsequent conduct of the assessee for a follow up action on an amount of Rs.3,21,308/-, which is only an account entry adjustment, technically speaking cannot be taken exception to either by Tribunal or for that matter by the Revenue. For this, we do not find any need for a finding to be given in the order of the Tribunal in the earlier round of litigation.
16. We do not for a moment deny the fact that a sum of Rs.3,21,308/- for which suomotu credit was taken by the assessee was forming part of Rs.5,38,796/-, which was earlier reversed by the assessee. On the admitted fact, Rs.3,21,308/- represented the enumerated input services as given under Rule 6(5) of the Cenvat Credit Rules, 2004, we have no hesitation in accepting the plea of the assessee that on a technical adjustment made, the question of unjust enrichment as a concept does not arise at all for the assessee to go by Section 11B of the Central Excise Act, 1944.
17. In the circumstances, we set aside the order of the Tribunal and allow the appeal filed by the assessee and hold that legally speaking there is no impediment in the asseessee taking suomotu credit of the sum of Rs.3,21,308/-. In the light of the above, we allow the appeal.
18. We may also note that in ground (C) of the appeal grounds, the assessee had specifically pointed out that what they debited in the Cenvat Account was not at all made towards any duty payment, which would require a refund claim. The assessee made a specific claim that they had re-credited only the credit reversed on those services mentioned under Rule 6(5) of the Cenvat Credit Rules, 2004 and nothing beyond.
19. On this aspect, we specifically posed the question to learned counsel appearing for the assessee, who re-affirmed the same and given the fact that re-credit of the credit reverse was only in respect of those enumerated services under Rule 6(5) of the Cenvat Credit Rules, 2004 on which there is no dispute from the Revenue, we have no hesitation in accepting the assessee’s case.
20. In the result, we set aside the order passed by the Customs, Excise and Service Tax Appellate Tribunal and allow the assessee’s case. No costs. Consequently, the connected miscellaneous petition is closed.”
The Hon’ble CESTAT stated that from the above judgment it is clear that suo motu re-credit of the amount reversed by an assessee, there is no need to file any refund claim under Section 11B. In view of the Madras High Court judgment, which is squarely applicable in the present case, re-credit of the amount already reversed by the appellant cannot be objected to.
The Hon’ble CESTAT further stated that as regards to the Revenue’s reliance on the Larger Bench judgment in the case of BDH Industries Ltd. (supra), the same has been departed by this Tribunal in the case of Sopariwala Exports Pvt. Ltd. (supra).
In view of the above the appeal is allowed.