2004 (9) TMI 477 - AT - Central Excise

Summary

Issues:
1. Refunds under Rule 5 of CENVAT Credit Rules, 2001
2. Interpretation of Notification No. 11/2002-C.E. (N.T.)
3. One-to-one correlation between inputs and final products

Analysis:
The judgment revolves around the refunds totaling to Rs. 74,99,199/- granted to the appellants under Rule 5 of the CENVAT Credit Rules, 2001, for duty paid on inputs used in manufacturing final products exported under bond during the first 3 quarters of the financial year 2001-2002. The department raised concerns regarding the refunds, leading to a show cause notice for recovery. The original authority confirmed the demand and imposed a penalty of Rs. 1 lakh, which was upheld in the appeal against it, prompting the present appeal and application.

The crux of the matter lies in the interpretation of Notification No. 11/2002-C.E. (N.T.) and the one-to-one correlation between inputs and final products under the CENVAT Credit Scheme. The appellant's counsel argued that the demand was based on a misunderstanding of Condition No. 5 of the notification, emphasizing that refunds should only be allowed when the manufacturer cannot utilize the credit of duty on inputs against exported goods during the relevant quarter or month. The counsel relied on a precedent to support their stance regarding the utilization of credit within the specified period.

During the proceedings, the Tribunal considered the contentions of both parties. The Departmental Representative (DR) supported the impugned order's view without providing a distinction between the relevant rules. However, the Tribunal found that the refunds were prima facie in accordance with the provisions of Condition No. 5 of the notification. Consequently, the appellants were granted a waiver of pre-deposit and a stay of recovery concerning the duty and penalty amounts, as they had presented a strong case in their favor.

In conclusion, the judgment clarifies the application of Rule 5 of the CENVAT Credit Rules, 2001, in the context of refunds granted to manufacturers for duty paid on inputs used in exported final products. The interpretation of the notification's conditions, particularly regarding the utilization of credit within the specified period, played a crucial role in determining the outcome of the appeal.