2010 (5) TMI 486 - AT - Central Excise

Cenvat credit refund - no refund of credit shall be allowed if the manufacturer avails of drawback allowed under the Customs and Central Excise Duty Drawback Rule, 1995 or claims rebate of duty under the Central Excise Rules, 2001 - nothing on record to show that the merchant exporter had availed only the customs duty drawback and the appellants have also not produced any document to prove the same - Commissioner (Appeals) s finding that there is no evidence that the drawback claim was only of customs duty is factually incorrect as from the drawback rate schedule, itself it is clear that the drawback rate prescribed is only of customs duty and there is no excise duty component in the all industry rate of Drawback fixed for Aluminium pistons/piston assembly of heading 84.63 Appeal allowed

Summary

Issues:
1. Eligibility for cash refund of accumulated Cenvat credit in case of export under drawback claim.

Analysis:
The appellant, a manufacturer of aluminium pistons and piston assembly, made clearances for export without payment of duty against CT-1 produced by merchant exporters. Subsequently, they filed refund claims under rule 5 of Cenvat Credit Rules, 2002, for the accumulated Cenvat credit. A show-cause notice was issued demanding the refunds back, stating that the goods were exported under drawback claim by the merchant exporter, making cash refund of Cenvat credit unavailable. The duty demands were confirmed, and penalties imposed. The Commissioner (Appeals) upheld the Deputy Commissioner's order, leading to an appeal before the Tribunal.

The main contention was whether the appellant, who cleared goods for export under drawback claim, was eligible for the cash refund of the accumulated Cenvat credit. Rule 5 of the Cenvat Credit Rules, 2002, allows for such refund, subject to certain conditions. The proviso to this rule states that no refund shall be allowed if the manufacturer avails of drawback under the Customs and Central Excise Duty Drawback Rule, 1995. The Commissioner (Appeals) argued that there was no evidence to prove that only customs duty drawback was claimed, and the appellant failed to provide supporting documents. However, based on the drawback rate schedule for 2001-2002, it was evident that the drawback rate prescribed for the goods in question was solely for customs duty, with no excise duty component. This fact contradicted the Commissioner's finding, making the impugned order incorrect.

The appellant's counsel argued that based on the Circular No. 83/2000-CUS., dated 16-10-2000, when only the customs portion of duty is claimed as per the industry rate of drawback, the refund of unutilized credit of Central Excise Duty should be allowed. Referring to a previous Tribunal decision in a similar case, it was contended that the appellant should be eligible for the cash refund of accumulated Cenvat credit under rule 5. The Departmental Representative defended the impugned order, emphasizing that once drawback is claimed, cash refund of Cenvat credit is not available.

After considering the submissions and perusing the records, it was concluded that the appellant was indeed eligible for the cash refund of the accumulated Cenvat credit. The drawback rate schedule clearly indicated that the drawback prescribed was only for customs duty, making the Commissioner (Appeals)'s finding factually incorrect. Referring to the Board's Circular, it was held that when only the customs portion of duty is claimed as per the industry rate of drawback, the refund of unutilized credit of Central Excise Duty should be allowed. Consequently, the impugned order was deemed incorrect, and the appeal was allowed.