Assessee cannot encash the CENVAT Credit without following Procedure for making application, inviting a Scrutiny: Rajasthan HC [Read Order]

The Rajasthan High Court has held that assessee cannot encash the CENVAT credit without following procedure for making application, inviting a scrutiny.

The petitioner, M/s Balkrishna Industries Ltd. is a limited company and is engaged in the business of manufacturing automobile tyres and tubes falling under Chapter 40 of First Schedule to the Central Excise Tariff Act, 1985. For the purpose of manufacturing tyres the petitioner would utilise indigenous as well as imported raw materials. In order to avail the benefits of duty free imports the petitioner had obtained advance authorisations and imported goods without payment of duty in terms of notification dated 11.09.2009. For certain locally procured inputs the petitioner would apply and obtain invalidation letters from the Directorate General of Foreign Trade by getting the relevant advance authorisation cancelled for the quantity of goods invalidated.

Appearing for the petitioner counsel Ms. Disha Bhandari contended that the excise rules envisage either rebate or duty free procurement of the raw materials which are used for manufacturing export product. In the present case the petitioner opted for procedure under rule 18 of the rules of 2002 and made a rebate claim after payment of duty. Even if it is assumed that no duty was payable, the department cannot retain the petitioner's duty which has already been paid. She drew our attention to the decisions of various courts holding that payment of duty through CENVAT credit is as good as duty paid. The CENVAT rules make no distinction between a case where duty is paid through cash or through CENVAT credit adjustments. She therefore submitted that appellate and revisional authorities have committed serious error in rejecting the rebate claim.

The Division Bench of Justice Sudesh Bansal and Justice Akil Kureshi has said that it appears quite undisputable that the petitioner had availed the facility of importing goods under advance licences without payment of duty. In some cases such advance licence were invalidated in order to procure raw material duty free from local manufacturers. Raw materials so procured were utilised for manufacturing the export goods. At that time the petitioner availed the CENVAT credit and later on claimed the rebate under rule 18.

“The Government of India has no authority to retain the sum which is collected without authority of law. If a person deposits such sum under mistake he may also claim refund thereof and if Government of India intends to withhold the same, the same may be branded as withholding the amount without authority of law. However in the present case the situation is different. The amount was not deposited in cash but by encashing CENVAT credit. We are conscious that the judgments have made observations to the effect that payment of duty through the CENVAT facility is as good as duty paid. However as observed earlier, it is not an instance of duty being paid. It is an instance of depositing a certain sum with the Government of India which was not payable. We therefore are in agreement with the view of appellate and revisional authorities that by this means the petitioner cannot claim refund of the amount which was offered through CENVAT credit. As is well known, unused CENVAT credit can be encashed subject to certain terms and conditions. The petitioner cannot encash the CENVAT credit without following the procedure for making an application and inviting a scrutiny whether the terms and conditions under which such unused CENVAT credit can be encashed are satisfied,” the court ruled.

M/s Balkrishna Industries Ltd. vs Union Of India

CITATION: 2022 TAXSCAN (HC) 188

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