CESTAT Rules CENVAT Credit Refund Cannot Be Denied Due to Procedural Lapse of Filing Monthly Claims Instead of Quarterly [Read Order]

The Chandigarh Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the refund of unutilized CENVAT credit cannot be denied merely on the procedural ground that the claimant filed refund claims on a monthly basis instead of a quarterly basis.

Harsoria Healthcare Pvt Ltd (Respondent), a Export Oriented Unit (EOU) engaged in the manufacturing of IV Cannula and AV Fistula, had filed 26 refund claims on a monthly basis for the period covering March 2012 to July 2014 under Rule 5 of the CENVAT Credit Rules, 2004. These claims were initially sanctioned by the authorities through various speaking orders.

However, the Revenue Department contended that the respondent had erroneously filed the refund claims in violation of the safeguards, limitations, and conditions provided under Paragraph 2.0 of Notification No. 27/2012-C.E. (N.T.) dated 18.06.2012.

The Department argued that the claims should have been filed on a quarterly basis and also raised objections regarding the timing of the debit of the amount from the CENVAT credit account. A Show Cause Notice was issued, and the matter was adjudicated.

The Commissioner (Appeals) held that filing multiple refund claims for a single quarter was only a procedural lapse and that the substantial benefit of a refund could not be denied due to such procedural irregularities.

The Commissioner also dropped the penalty under Section 11AC of the Central Excise act. Aggrieved by this order, the Revenue Department filed an appeal before the Tribunal.

The Revenue argued that the conditions of the Notification are mandatory and non-fulfillment, such as the timing of the debit and the frequency of filing, should result in the rejection of the claim.

The Bench, comprising S.S. Garg (Judicial Member) and P. Anjani Kumar (Technical Member) observed that the delay in debiting the CENVAT account and the filing frequency were merely procedural lapses. The Tribunal observed that the condition was eventually complied with before the issuance of the sanction order.

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The Tribunal further noted that the original refund sanction orders were passed by the proper officer after applying his mind and had attained finality as they were not challenged by the Department. Therefore, the refunds could not be termed as "erroneous" to invoke recovery proceedings under Section 11A of Central Excise Act.

Relying on the decision in Chariot International Pvt. Ltd. and other precedents, the Bench reiterated that substantial benefits cannot be denied due to procedural infractions. Finding no infirmity in the Commissioner’s order, the Tribunal dismissed the appeal filed by the Revenue.

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