2012 (8) TMI 320 - AT - Central Excise

Waiver of pre-deposit - refund claim under Rule 5 of the Cenvat Credit Rules - accumulated Cenvat Credit of duty paid on input used in or in relation to the manufacture of exported goods on the ground that the applicants were unable to utilize the same Held that - During the period 2004, 2005 and 2006, the applicant does not even mentioned the said amount of Cenvat credit as receivable in the books of accounts and all of a sudden took a credit for the past three years and claiming the same as accumulated unutilized on account of export of goods - service tax for three years were taken by making one entry that after a lapse of time - applicant failed to make out a case for total waiver of duty - applicants are directed to deposit 50% of the amount of demand

Summary

Issues:
1. Waiver of pre-deposit of duty
2. Refund claim under Rule 5 of the Cenvat Credit Rules
3. Eligibility of credit for unutilized accumulated amount
4. Interpretation of Rule 5 of the Cenvat Credit Rules
5. Compliance with provisions of Rule 4 of the Cenvat Credit Rules
6. Nexus between input services and exported goods

Analysis:
The judgment revolves around the application for waiver of pre-deposit of duty amounting to Rs.37,70,628/- with interest. The applicants, engaged in manufacturing socks, filed a refund claim under Rule 5 of the Cenvat Credit Rules for accumulated credit of service tax paid on inputs used in manufacturing exported goods. The Commissioner (Appeals) set aside the refund and directed the applicants to deposit the sanctioned refund along with interest, questioning the nexus between input services and exported goods.

The applicants contended that as per Rule 5, they were entitled to refund for unutilized accumulated credit. They argued that the credit was rightfully taken and relied on a Tribunal decision to support their case. On the other hand, Revenue argued that the credit was taken after a significant delay and not reflected in the books of accounts, raising doubts about the utilization of input services in manufacturing exported goods.

The Tribunal analyzed Rule 5 of the Cenvat Credit Rules, emphasizing the conditions for refund of unutilized credit related to exported goods. They referred to a Board Circular allowing refund claims for past periods in subsequent quarters. However, the Tribunal highlighted a High Court decision requiring verification of actual utilization of eligible services for exported output services. The Tribunal found the delayed credit entry suspicious and directed the applicants to deposit 50% of the demand within eight weeks, with the remaining dues waived during the appeal's pendency.

In conclusion, the judgment delves into the intricacies of Cenvat Credit Rules, emphasizing the importance of timely credit utilization and establishing a clear nexus between input services and exported goods. The Tribunal's decision to partially uphold the demand reflects a balanced approach considering the interests of both the applicants and the revenue authorities.