2014 (4) TMI 1163 - AT - Central Excise

Refund claim - unutilized Cenvat credit accumulated in their Cenvat account on inputs utilised in the export of the goods - rejection on the ground that appellant have not fulfilled the conditions of N/N. 11/2002-C.E. (N.T.) dated 1-3-2002 in so far as the appellant was in a position to utilize the credit in respect of the inputs against the goods exported during the period 23-12-2002 to 31-12-2003 - Held that - Condition (v) of Notification No. 11/2002 stipulates that refund is allowed only in those circumstances where a manufacturer is not in a position to utilize the credit of duty on inputs against goods exported during the quarter or month to which the claim relates - It is seen that the Cenvat credit accumulated cannot be utilised against the clearance of the goods for home consumption - refund allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against rejection of refund claim under Rule 5 of Cenvat Credit Rules, 2002 read with Section 11B of the Central Excise Act, 1944.

Analysis:
The appellants, engaged in the manufacture of "Flavoured Drink Concentrate," filed a refund claim of Rs. 19 lakhs for unutilized Cenvat credit on inputs used in exporting goods. A show cause notice was issued proposing rejection of the claim for not meeting conditions of Notification No. 11/2002-C.E. (N.T.). The adjudicating authority and Commissioner (Appeals) rejected the claim based on non-utilization of credit for export duty payment.

The Commissioner (Appeals) noted that as per Notification No. 11/2002, the appellants should have given preference to using the credit against exported goods, and only if not possible, then opt for other means. However, the Tribunal found this interpretation incorrect. Rule 5 allows refund when adjustment of credit is not possible, without availing drawback or rebate. As the appellants cleared goods under bond without duty payment and did not claim drawback, the refund was justified.

Citing precedents like Precision Tool Room, Jenntex Engg. Co., Chandra Cotton Fabrics, and Idol Textiles Ltd., the Tribunal emphasized that refund is permissible when adjustment is not feasible. The Tribunal disagreed with the Commissioner (Appeals) and set aside the rejection, allowing the appeal with consequential relief. The judgment highlights the correct interpretation of Rule 5 and the conditions for refund eligibility under Cenvat Credit Rules.

In conclusion, the Tribunal found the impugned orders unsustainable and overturned them, granting relief to the appellants. The judgment clarifies the correct application of Rule 5 and the entitlement to refund when credit adjustment is not possible, ensuring compliance with the relevant legal provisions and notifications.