2011 (7) TMI 482 - AT - Central Excise

Cenvat credit - refund claims as per the provisions of Rule 5 of Cenvat credit Rules 2002 - Held that - refund of the amount of Cenvat Credit lying unutilised due to exports there is nothing on record to indicate that there was any demand of duty on such waste and scrap in order to reduce the same from refund claim in absence of any confirmed demand reduction from the refund claim is not proper and not in accordance with the law order set aside and appeals allowed.

Summary

Issues:
Refund claims under Rule 5 of Cenvat Credit Rules, 2002 - Reduction based on standard input output norms (SION) and waste/scrap generated during manufacturing.

Analysis:
The appeals were against an order reducing refund claims under Rule 5 of Cenvat Credit Rules, 2002, based on SION norms and waste/scrap generation during manufacturing. The appellants, manufacturers of stainless steel articles, exported their products under undertakings. They availed Cenvat credit on duty paid for inputs but faced reductions in refund claims by the adjudicating authority and Commissioner (Appeals). The appellants contested these reductions, arguing that Rule 5 does not mandate restricting refunds based on SION norms and that no demand or notice existed for duty on waste/scrap.

The Commissioner (Appeals) upheld the reductions, citing the marketability of stainless steel scrap and reliance on SION norms. However, the Tribunal found the Commissioner's approach flawed. Rule 5 does not authorize reducing refund claims based on SION norms for unutilized Cenvat credit due to exports. The Tribunal noted that the SION norms were irrelevant in this context. Additionally, no confirmed demand existed for duty on waste/scrap, making the reduction from the refund claim improper and legally unsound.

Consequently, the Tribunal set aside the impugned order, allowing the appeals with consequential relief. The judgment emphasized that the reduction of refund claims based on SION norms and waste/scrap without confirmed demands was unsustainable and contrary to the law. The decision clarified the proper application of Rule 5 in refund claims related to unutilized Cenvat credit due to exports and highlighted the impermissibility of reducing amounts without quantified demands.