Gujarat HC Holds PLA Payment Cannot Result In Double Recovery, Directs ₹3.74 Cr. Credit Restoration

The Gujarat High Court on 24 June held that the Central Excise Department cannot require a taxpayer to claim a cash refund after the taxpayer has already deposited the disputed duty amount through the Personal Ledger Account (PLA), as the corresponding CENVAT credit must be restored to prevent double recovery.

A Division Bench of Justices A.S. Supehia and Vaibhavi D. Nanavati allowed the writ petition filed by Inductotherm India Pvt. Ltd. and directed the Department to re-credit Rs. 3,74,33,462 to the company's electronic credit ledger within six weeks, observing that the Department had wrongly treated the request as one seeking suo motu re-credit when the company was only seeking restoration of credit after depositing the equivalent amount in cash. It held:

“The re-credit of the amount debited from the Cenvat Register is the only plausible way to get the amount adjusted, or else there would be double recovery.”

The dispute arose after Inductotherm had initially discharged excise duty by utilising CENVAT credit. Following an earlier judgment of the Gujarat High Court holding that such utilisation was impermissible for payment of amounts recoverable under Section 11D of the Central Excise Act (which deals with amounts collected as duty but not deposited with the Government), Inductotherm deposited Rs. 3.74 crore through its PLA.

The company thereafter requested the Department to restore the equivalent amount to its CENVAT account. However, the request was rejected on the ground that the Central Excise Act and Rules did not contain any provision permitting such re-credit and that the company should instead file a refund claim under Section 11B of the Central Excise Act (which provides the procedure for claiming refund of duty).

Before the High Court, Inductotherm submitted that it was not seeking suo motu re-credit but only restoration of credit after depositing the equivalent amount in cash pursuant to the earlier judgment. It argued that requiring it to pursue a refund claim would create an anomalous situation because the earlier judgment had held that cash refund of such credit was not permissible.

The Revenue contended that in the absence of an express statutory provision permitting re-credit, Inductotherm's only remedy was to file a refund application under Section 11B. It also relied on the Larger Bench decision of the Customs, Excise and Service Tax Appellate Tribunal in BDH Industries Ltd. to oppose the claim.

Rejecting the Revenue's submissions, the Court held that the Department had failed to appreciate the nature of Inductotherm's request. It observed that the company had already deposited the disputed amount through PLA and that failure to restore the corresponding credit would effectively result in double recovery. The Bench noted:

“The respondent Department after the deposit of the amount of duty from PLA should have suo motu sanctioned and re-credited the amount.”

Accordingly, the High Court quashed the communications rejecting Inductotherm's request and directed the respondents to re-credit Rs. 3,74,33,462 to the company's electronic credit ledger under the GST regime within six weeks.

For the Petitioners: Mr. Paresh M. Dave, Advocate

For the Respondents: Mr. C.B. Gupta, Senior Standing Counsel