CESTAT Rejects Raymond’s Excise Refund Claim Filed After 13 Years, Holds S. 11B Limitation Strictly Applicable to CENVAT Credit Reversal [Read Order]

The Mumbai Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) dismissed Raymond Limited’s appeal and held that the refund claim filed after a long delay of nearly thirteen years was barred by limitation under Section 11Bof Central Excise Act, 1944.

Raymond Limited availed CENVAT credit on inputs. After changes in excise duty structure in Union Budget 2004, the company opted to take full exemption from central excise duty under Notification No. 30/2004-C.E. dated 09 July 2004.

As a condition for this exemption, Raymond Limited reversed CENVAT credit amounting to Rs. 1,46,26,733/- on 17 July 2004, based on CBIC circular which allowed reversal of credit to claim exemption. Many years later, based on some Tribunal decisions which said amendment to Rule 11(3) of CENVAT Credit Rules in 2007 prospective, Raymond Limited filed a refund claim on 02 June 2017 to get back the amount reversed in 2004.

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The Department issued show cause notice and rejected refund claim because it was time-barred. The Commissioner (Appeals) upheld this rejection, so appellant went to CESTAT. The appellant's counsel argued that reversal of credit in 2004 was done under mistake of law, as no statutory provision at that time required such reversal. They argued that limitation under Section 11B not applied in cases of payment under mistake of law and refund claim maintainable based on later court decisions in similar matters.

The Department argued that refund claim was clearly barred by limitation as it was filed almost thirteen years after the reversal date. The Revenue said reversal of CENVAT credit was a conscious and voluntary act by appellant to meet condition of exemption notification and not payment under mistake of law. They relied on Supreme Court decision in Mafatlal Industries Ltd. to say refund claims must follow Section 11B strictly, except in cases of unconstitutional levy.

The two-member bench comprising S.K. Mohanty (Judicial Member) and M.M. Parthiban (Technical Member) observed that the appellant had consciously chosen to reverse CENVAT credit in order to avail full exemption from duty. The Tribunal explained that the exemption notification clearly required non-availment of credit and the appellant had exercised the option available to it under the law. It pointed out that the CBIC circular only clarified available options and did not compel the appellant to reverse credit.

The Tribunal further observed that the reversal of credit could not be treated as payment under mistake of law merely because subsequent decisions in other cases took a different view. It explained that refund claims based on later judicial pronouncements in other assessees’ cases cannot reopen matters that have already attained finality. Relying on settled Supreme Court law, the Tribunal observed that Section 11B applies strictly to refund claims unless the levy itself is unconstitutional, which was not the case here.

Because of these, the Tribunal upheld the order rejecting the refund claim and dismissed the appeal filed by Raymond Limited.

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