By TIOL News Service

MUMBAI, DEC 27, 2016 : THIS is a Revenue appeal filed in the year 2006.

The Commissioner (Appeals) allowed cash refund of the amount which was pre-deposited by the appellant through CENVAT account as per the stay order of the Tribunal.

As mentioned, Revenue is in appeal contending that refund of the amount which was pre-deposited by way of debit in the cenvat account cannot be given in cash.

The AR submitted that the Commissioner (Appeals) allowed the refund in cash only on the basis of judgment in the case of Commissioner of Central Excise, Ranchi vs. Ashok Arc - 2005-TIOL-208-HC-RANCHI-CX. That the facts involved therein are different hence the same is not applicable. Inasmuch as the respondent was very much registered at the time of sanction of the refund and was maintaining CENVAT account and, therefore, the re-credit of the refund in CENVAT account was the only option and no cash refund could have been given.

None appeared on behalf of the respondent.

The Bench observed –

" 5. …, I find that the respondent had debited Rs. 50 lakhs in their account as pre-deposit ordered by this Tribunal in some demand case. It is also fact that the respondent after debit of this amount did not pay any amount of duty from PLA/cash, subsequently they started availing exemption under Notification No. 30/2004-CE dt. 9.7.2004. Therefore they were neither paying excise duty nor availing cenvat credit however the respondent was maintaining cenvat account. In this fact, since the respondent had debited the pre-deposit amount from Cenvat there was no burden on them of any cash payment liability. Therefore, there is no reason to allow the cash refund, if the respondent would have been burden with cash payment of duty subsequent to the pre-deposit of amount then the respondent's claim of cash refund can be justified, however this is not the case in the fact of the present case. The Larger Bench in the case of Gauri Plasticulture Pvt. Ltd. Vs. Commissioner - 2006-TIOL-677-CESTAT-MUM also held that unutilized cenvat credit can be refunded only to the extent that the assessee has paid the duty from PLA/cash otherwise no cash refund can be given against the cenvat credit. As per this settled position by the Larger Bench of this Tribunal, in my considered view, the cash refund ordered by the Commissioner (Appeals) is absolutely wrong and without any provision…."

After distinguishing the case law in Ashok Arc (supra) relied upon by the lower appellate authority, the CESTAT added –

"…I am also of the view that merely by debit in the cenvat account the nature of cenvat credit cannot be changed to cash at the time of sanctioning of refund. Cash refund can be given only in situation where either the assessee has paid the amount in cash or refund is against the export of goods which is not the case here…."

Holding that the refund in cash ordered by the Commissioner (Appeals) is absolutely without authority of law, the impugned order was set aside and the Revenue appeal was allowed.

(See 2016-TIOL-3329-CESTAT-MUM)