2007 (6) TMI 421 - AT - Central Excise

Summary

Issues involved: Refund claims under Cenvat Rules, eligibility of credits under Rule 3 and Rule 9A, rejection of refund claims based on average rates, distinction between normal credit and transitional credit, requirement of correlation between inputs and exported final products.

Summary:

1. The appellants contested the rejection of their refund claims under the Cenvat Rules, specifically challenging the disallowance of a claim of Rs. 79,177 under Rule 9A and the rejection of other claims based on average rates. The appellants, engaged in textile processing and exporting goods, argued that the credits of duty availed on inputs could not be utilized for goods cleared in the domestic market, leading to accumulated credits under Rule 5.

2. The Tribunal disagreed with the Commissioner's finding that Rule 9A is a transitional provision for textiles and textile articles, emphasizing that transitional credit falls under Rule 3(2) itself. The Tribunal clarified that Rule 9A outlines the method for calculating credit but does not differentiate it from Rule 3(2). The Tribunal directed a re-examination of the rejected refund claim of Rs. 79,177 on other grounds, if any.

3. Regarding the distinction between normal credit and transitional credit, the Tribunal noted that Rule 5 of the Cenvat Credit Rules does not support such differentiation as assumed by the lower authorities. The Tribunal highlighted the importance of the language used in the Rules, such as "or any reason" and "shall be allowed," indicating that all credits should be treated equally. The matter was referred back to the original authority for re-examination.

4. The Tribunal addressed the requirement of correlation between inputs used and final products exported, noting that the Commissioner's decision ignored detailed charts and summary sheets submitted by the appellants. These documents provided specific details of each lot of grey fabrics in the exported goods. The Tribunal instructed a reconsideration of the rejection of the four claims, including verification of the submitted charts and statements.

5. In conclusion, the appeal was allowed for remand, with the original adjudicating authority instructed to re-determine the refund claims while adhering to the principles of natural justice. The decision was pronounced in court on 15-6-2007.