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Crompton Greaves Ltd. Vs. Commissioner of Central Excise, Mumbai - III - (Customs, Excise and Service Tax Appellate Tribunal) (04 Jun 2019)

Suo motu credit cannot be taken without applying for refund



In present case, the Appellants are engaged in the manufacture of transformers. For smooth functioning of the said final product, the Appellants use transformer oil, purchased from third parties. During the disputed period, the Appellants had entered into contract with Power Grid Corporation of India Ltd., West Bengal for supply and installation of the transformers at the customer's site. As per the contract, the Appellants were required to dispatch transformers along with transformer oil. For supply of the transformers, the Appellants have computed and paid the central excise duty on the assessable value of both transformer and transformer oil. But, the transformer oil was not supplied along with the transformers. The said oil was subsequently supplied on payment of appropriate central excise duty.

The Appellants realized their mistake that, duty liability had been discharged twice on transformer oil. Accordingly, they had taken credit of Central Excise duty paid on such oil in their Cenvat account. Taking of suo motu credit by the Appellants was disputed by the Department and show cause proceedings were initiated, seeking for recovery of the wrongly availed Cenvat Credit along with interest and for imposition of penalty. The show cause notice was adjudicated vide order, wherein the proposals made therein were dropped, on the ground that the Appellants indeed had made payment of excise duty on two occasions and taking of credit based on appellants' own invoice in a technical contravention.

Against the adjudication order, Revenue has filed appeal before the Learned Commissioner (Appeals), which was disposed of vide the impugned order, by setting aside the adjudication order and in allowing the appeal in favour of Revenue. The Learned Commissioner (Appeals) has held that, suo motto credit cannot be taken without applying for refund in terms of Section 11B of the Central Excise Act, 1944. The Learned Advocate appearing for the appellants submitted that since the Appellants have inadvertently paid duty twice on transformer oil, taking of suo motto credit in the Cenvat account is proper and justified.

In present case, it is an admitted fact on record that the, Appellants had paid duty twice, once at the time of removal of transformer from the factory and subsequently on removal of the transformer oil. There is no statutory mandate for double payment of duty and in such cases, a manufacturer of excisable goods is permitted under the statute to claim refund of Central Excise duty paid in excess. Refund claim is governed under Section 11B. The said statutory provision prescribes the time limit for filing of refund application and fulfillment of the aspect of doctrine of unjust enrichment. The central excise statute does not provide any mechanism for taking of suo motto credit in the Cenvat account by the manufacturer. Since the issue involved in this case pertains to double payment of duty on transformer oil, the only recourse left to the appellants was to claim refund of the excess duty paid by it, in terms of Section 11B, which admittedly has not been complied with by the Appellants.

The Applicants have also taken the stand that since they have availed suo motto credit within one year from the date of payment of the duty amount, such availment of credit should be treated as refund claim. Such stand of the Appellants is not legally tenable, for the reason that, Section 11B of the Act clearly provides the modalities for filing of refund claim and entertaining of the same by the authorities. Since no formal refund application was filed, the case of the appellants is outside the scope and purview of Section 11B. There is no infirmity in the impugned order passed by the Learned Commissioner (Appeals). Appeal dismissed.


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