2011 (2) TMI 1155 - AT - Central Excise

Refund claim in respect of the duty paid on inputs used in the manufacture of exported goods denied - assessee exported certain quantity of their finished goods under bond - appellants relied upon the Notification No. 11/02-C.E. (N.T.), dated 1-3-2002 - Commissioner (Appeals) allowed the claim - Held that - As appellant failed to show that they are not in a position to utilize credit regarding which they claimed the refund. On the contrary, the narration in show cause notice shows that respondents were paying duty from their PLA after exhausting the credit for the same period therefore no merit in the contention of the respondents. Against assessee.

Summary

Issues:
1. Eligibility for refund under Rule 5 of Cenvat Credit Rules for duty paid on inputs used in the manufacture of exported goods.

Analysis:
The appeal before the Appellate Tribunal CESTAT, Kolkata involved a dispute regarding the eligibility of a refund claim under Rule 5 of the Cenvat Credit Rules. The case revolved around a manufacturer engaged in the production of pan masala, both with and without tobacco. The manufacturer had exported a quantity of finished goods and subsequently filed a refund claim for the duty paid on inputs used in the manufacture of the exported goods. The Commissioner (Appeals) had allowed the appeal, stating that the manufacturer was eligible for the refund as they were unable to utilize the Cenvat credit for the exported goods.

The main contention of the Revenue was that the refund under Rule 5 is only admissible if the manufacturer is unable to utilize the credit on inputs used in the manufacture of exported goods. The Revenue argued that since the manufacturer had paid duty from their PLA account after exhausting the credit, it could not be said that they were unable to utilize the credit. Therefore, the Revenue challenged the decision of the Commissioner (Appeals) on the grounds that the manufacturer was continuously utilizing the credit availed for the duty paid on inputs towards payment of duty on finished products.

On the other hand, the respondent argued that they filed the refund claim because they were unable to utilize the credit in respect of the inputs used in the manufacture of the exported goods. They relied on a specific notification outlining the conditions for claiming a refund on inputs used in goods cleared for export. The respondent also cited various decisions to support their claim for the refund.

The Tribunal analyzed the provisions of Rule 5 of the Central Excise Rules, which allow for the refund of duty in cases where the manufacturer is unable to utilize the credit availed on inputs used in the manufacture of exported goods. The Tribunal noted that there was no dispute regarding the eligibility of the refund under the rule. However, the Tribunal found that the impugned order by the Commissioner (Appeals) lacked a finding that the manufacturer was indeed unable to utilize the credit. As the manufacturer had paid duty from their PLA account after exhausting the credit, the Tribunal concluded that the refund claim was not sustainable. Therefore, the impugned order was set aside, and the appeal by the Revenue was allowed.