2007 (7) TMI 493 - AT - Central Excise

Summary

Issues: Refund of accumulated input credit under AED (T & TA) Act u/s Rule 5 of the Cenvat Credit Rules for goods exported under bond.

The judgment by the Appellate Tribunal CESTAT, Ahmedabad dealt with four appeals concerning the same appellant and the issue of seeking a refund of accumulated input credit under AED (T & TA) Act u/s Rule 5 of the Cenvat Credit Rules for goods exported under bond. The appellant, a manufacturer of man-made fabrics, used Poly Viscose Yarn as raw material, which had incurred duty under AED (T & TA) Act. The appellant exported the final product, on which no AED (T & TA) was leviable, leading to the accumulation of input credit under AED (T & TA) for which they sought a refund under Rule 5 of the Cenvat Credit Rules.

The learned Advocate for the appellant argued that refunds were allowed by the original authority based on the certificate provided by the appellant, confirming that no drawback or rebate had been claimed for the consignments for which refund claims were made. However, the Department's representative contended that refund under Rule 5 applied only to goods exported under bond, pointing out that the appellant had exported both under claim for rebate and under bond. The Tribunal found that no drawback or rebate had been claimed for the consignments for which refunds were sanctioned, indicating exports made under bond.

The Tribunal referred to Rule 5 of the Cenvat Credit Rules, which allows for the refund of input credit that cannot be utilized for any reason. The appellant's inability to utilize the credit of duty under AED (T & TA) Act on the exported goods formed the basis of their refund claim. The Department argued that the AED (T & TA) credit could not be utilized if the final products were cleared for home consumption, making the refunds ineligible. However, the Tribunal noted that if the inputs, such as cotton yarn, were exported without payment of duties, or if duties were paid and then exported, rebate of both duties was permissible. Therefore, the literal interpretation of Rule 5 allowed for refunds even in cases where credit utilization was restricted for domestic clearances.

Moreover, the Tribunal highlighted a clarification by the C.B.E. & C., stating that refund of AED (T & TA) was permissible under Rule 5 of the Cenvat Credit Rules, 2002, under specific conditions. The clarification emphasized that the credit of AED (T & TA) could be claimed as a refund under Rule 5 on the export of goods, even with restrictions on credit utilization. In light of these considerations, the appeals were allowed, granting consequential relief to the appellant.