Charge Of Double Benefit Sustains Only If Assessee Claims Refund, Utilises It For Paying Excise Duty: CESTAT

The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), Ahmedabad Bench has ruled that the charge of double benefit is only valid when the assessee claims a refund and uses it to pay excise duty.

The bench of Ramesh Nair (a judicial member) has observed that it set aside the order passed by the Revenue Department rejecting the refund application of the assessee. The refund cannot be denied on the basis of the Appellant receiving a double benefit as a result of the non-transfer of unutilized CENVAT credit.

The Appellant is an EOU unit and filed 18 refund claims under Rule 5 of the Cenvat Credit Rules, 2004 read with Notification No. 5/2006-CE (NT) for unutilized Cenvat Credit of Input Services used in or in relation to the manufacture of export goods.

On receiving the final exit order dated July 21, 2011, from the Development Commissioner, Kandla SEZ, the appellant firm submitted an online application for amendment of Central Excise registration as a DTA unit.

After debonding, the appellant did not carry forward the accumulated Cenvat Credit but showed the same as Cenvat Credit Refund Receivable in its financial accounts and balance sheet.

The jurisdictional assistant commissioner sanctioned a refund of unutilized cenvat credit to the appellant.

The department appealed the order, alleging that the appellants have taken double advantage inasmuch as they have taken refunds and they did not debit or reverse the amount from Cenvat's account.

The appellant also filed an appeal before the Commissioner (Appeals), seeking interest in a sanctioned refund. The Commissioner of Appeals allowed the appeal of the department and rejected the appeal of the appellant.

The applicant submitted that since the exports by the EOU unit and the accumulation of unutilized cenvat credits of service tax paid on various services used in the export of manufactured goods are not in dispute, the fact that the cenvat credit balance was not transferred to the DTA unit's books from the EOU unit cannot lead to the inference that the cenvat credit balance in the EOU books has lapsed as of July 24, 2011. It is settled law that unutilized credit cannot lapse as long as final products manufactured or exported by utilising the cenvat credit become vested rights of the assessee. Since the appellant firm has acquired the right and privilege of getting a refund of the cenvat credit of the service tax paid and remaining unutilized on account of exports before the deboning of the EOU unit, there cannot be any lapsing of the credit whatsoever as per law.

The provision of Notification No. 27/2012-CE (NT) regarding reversal of credit for availing refund under Rule 5 of the CCR, 2004 cannot be given retrospective effect with respect to refund applications filed under the provision of Notification No. 5/2006-CE (NT). Notification No. 27/2012-CE(NT) came into force on June 18, 2012, whereas the CENVAT credit refund claims were filed by the appellant from July 2006 to December 2009 in respect of unutilised credits on account of exports. By no stretch of the imagination, the appellant can be asked to fulfil the condition of Notification No. 27/2012-CE (NT) on the date of sanctioning of the refund claim just because he delayed the refund by issuing a show cause notice on illegal grounds.

"The non transfer of unutilised cenvat credit is as good as a reversal of cenvat. The charge of the double benefit will sustain only when the assessee in one hand claims the refund and in other hand utilises the same amount for payment of duty on their clearance of goods, which is nobody‟s case. Hence the allegation of double benefit of the same amount does not even exist," the CESTAT said.

The Tribunal held that the interest on a delayed refund is payable under Section 11BB of the Central Excise Act, 1944, on the expiration of a period of three months from the date of receipt of the application under Section 11B(1) of the Central Excise Act, 1944.

Case Title: Bright Engineering Works Versus C.C.E. & S.T.-Daman

Citation: Excise Appeal No.10493 of 2014

Date: 15.12.2022

Counsel For Appellant: Advocate S.Suriyanarayanan

Counsel For Respondent: Joint Commissioner (AR) Ghanasyam Soni

Click Here To Read The Order