2007 (5) TMI 125 - AT - Central Excise

Refund - Department rejected the refund claim on the ground that appellant is running unit and they can avail the accumulated credit for payment of duty on such final product manufactured and cleared by them for home consumption - Held that department contention was not justified and allowed refund

Summary

Issues:
Refund claim rejection under Rule 5 of Cenvat Credit Rules, 2002.

Analysis:
The appellant, engaged in processing cotton fabrics for home consumption and exports, filed a refund claim under Rule 5 of the Cenvat Credit Rules, 2002. The claim was rejected as the appellant could not utilize the accumulated Cenvat credit. The appellant argued that unutilized credit is eligible for refund, citing Tribunal decisions supporting this view. The JDR contended that the accumulated credit could be used for duty payment on final products. The issue revolved around the refund of unutilized Cenvat credit despite home clearance. The Commissioner (Appeals) rejected the appeal, stating that the appellant's products could be cleared for home consumption or export with duty payment, hence not eligible for refund.

The Division Bench's decision in a similar case contradicted the Commissioner's findings. The Bench highlighted safeguards under Notification No. 11/02-C.E. (N.T.), allowing refund claims for exported goods if credit remained unutilized. The appellant had availed transitional credit under Rule 9A, which entitled credit for inputs in stock. The Bench emphasized that Rule 5 allows refund of accumulated credit if not utilized, without the need for justification. The Division Bench's ruling in Navbharat Industries case was applied, setting aside the earlier order and allowing the appeal with consequential relief.

In conclusion, the judgment addressed the rejection of a refund claim under Rule 5 of the Cenvat Credit Rules, 2002. The appellant's inability to utilize accumulated credit despite home clearance led to the initial rejection. However, the Division Bench's decision in a similar case established that unutilized credit is eligible for refund without justification. The appellant's appeal was allowed based on this precedent, emphasizing the substantive right to refund under Rule 5.