2012 (11) TMI 237 - AT - Central Excise

Cash refund of the accumulated cenvat credit appellant s clearances of Tannin were only for the export, they were not in a position to utilize the cenvat credit in respect of the drums - Held that - Since the definition of input as given in Rule 2(k) of the Cenvat Credit Rules cover the goods used as packing material, there is no doubt about the admissibility of cenvat credit in respect of HDPE drums used for packing of the final products - appellant were eligible for cash refund of the accumulated cenvat credit under the provisions of Rule 5 of the Cenvat Credit Rules

Summary

Issues:
1. Admissibility of cash refund of accumulated cenvat credit under Rule 5 of the Cenvat Credit Rules, 2004 for a manufacturer exporting products without domestic clearances.

Analysis:
The case involved a manufacturer of Tannin, exporting products manufactured from imported arecanut/betel nut under bond without payment of duty. The manufacturer purchased duty paid plastic drums for packing, availing Cenvat credit. The Asstt. Commissioner allowed a cash refund of the accumulated Cenvat credit under Rule 5, stating that the credit cannot be used for domestic clearances due to the absence of such clearances. However, the Commissioner (Appeals) overturned this decision, leading to the appeal.

The appellant argued that the Cenvat credit for packing material was correctly taken as the final product was solely for export, and they had no domestic clearances to utilize the credit. The Commissioner (Appeals) upheld the disallowance of cash refund, emphasizing that the credit should first be utilized for duty payments on domestic clearances before a refund is considered. The appellant contended that the impugned order lacked a basis.

Upon review, the tribunal noted that the appellant's manufacturing process and export-only sales pattern aligned with the Cenvat credit rules. The definition of 'input' encompassed packing material, justifying the admissibility of Cenvat credit for the plastic drums. The tribunal observed that the appellant had no domestic clearances to utilize the credit, as confirmed by the Asstt. Commissioner's findings. The tribunal deemed the Commissioner (Appeals)'s decision as illogical, as the appellant met the criteria for cash refund under Rule 5. The tribunal concluded that the appellant was entitled to the Cenvat credit on packing material used for exports, overturning the impugned order and allowing the appeal.

In summary, the tribunal upheld the manufacturer's eligibility for a cash refund of accumulated Cenvat credit under Rule 5, considering the export-oriented nature of the business and the absence of domestic clearances for utilizing the credit.