2013 (11) TMI 1028 - AT - Central Excise

Refund under Rule 5 of the CENVAT Credit Rules, 2004 deemed CENVAT credit on the grey fabrics - Held that - After considerable passage of time it is not possible for the appellant to produce such document which did not belong to the appellant - The merits of this case has to be seen against such factual matrix - Once it is agreed in principle that refund as per provisions of Rule 5 of CENVAT Credit Rules, 2004 shall be granted, in situation where the goods are supplied to any manufacturer without payment of duty under provisions of Rule 19(2) of the Central Excise Rules, 2002 and Notification No. 43/2001, the concerned assessee can, at this point of time, be asked only to produce the procurement certificate countersigned by the Assistant Commissioner having jurisdiction over the person procuring the goods. Quite often it may not be possible to establish one to one correlation between the raw material supplied and the goods exported and consequently between the raw material supplied and the Shipping Bills and ARE-2s - The raw materials get used in manufacture of different products and different products are exported under different Shipping Bills - if the Assistant Commissioner having jurisdiction was not enforcing his responsibility as envisaged under Notification No. 43/2001, the assessees cannot be penalized - both the appellant and some of the persons procuring the goods were in the same jurisdiction but no effort was made to do any verification at the relevant time - the balance of refund should be granted to the appellant Decided in favour of Assessee.

Summary

Issues:
1. Refund claim under Rule 5 of CENVAT Credit Rules, 2004 for unutilized deemed credit.
2. Requirement of producing certificate of non-availment of drawback for refund verification.

Analysis:

Issue 1: Refund claim under Rule 5 of CENVAT Credit Rules, 2004 for unutilized deemed credit:
The appellant, engaged in processing textile fabrics for export, filed a refund claim for unutilized CENVAT credit due to goods supplied to other exporters. The Commissioner (Appeals) allowed the refund based on Tribunal precedent, emphasizing that even if goods were supplied for further manufacturing, refund under Rule 5 was permissible. The Assistant Commissioner then sought a certificate of non-availment of drawback, which the appellant argued was the Department's responsibility to verify. The Commissioner (Appeals) upheld the rejection of the claim, leading to the present appeal. The appellant contended that the Department failed to verify the export and drawback conditions, stating that the responsibility lay with the persons procuring the goods. The Revenue argued that the onus to prove compliance with export and drawback conditions rested with the appellant, highlighting the lack of evidence supporting export. The Tribunal noted the absence of initial document requests and the impracticality of producing such documents later. Considering the factual context and the Assistant Commissioner's role in ensuring compliance, the Tribunal held that the appellant should only provide the procurement certificate, as establishing direct correlation between raw materials and exports might be challenging. Emphasizing the lack of Departmental verification despite jurisdictional proximity, the Tribunal ordered the balance of refund to be granted to the appellant, setting aside the lower authorities' orders.

Issue 2: Requirement of producing certificate of non-availment of drawback for refund verification:
The dispute arose when the Assistant Commissioner demanded a certificate of non-availment of drawback for refund verification, which the appellant argued was not prescribed in the initial order or rules. The appellant relied on Notification No. 43/2001-CE(N.T) requirements and the responsibility of the person procuring goods to comply with export and drawback conditions. The Revenue contended that the appellant failed to provide evidence of export and drawback non-claim, highlighting the necessity of Bill of Lading or Shipping Bill details as per Notification No. 11/2002-CE (NT). The Tribunal recognized the impracticality of retroactively obtaining such documents and stressed the Assistant Commissioner's role in ensuring compliance. It concluded that the absence of Departmental verification and the challenge of establishing direct material-export correlation warranted granting the refund without penalizing the appellant, ultimately allowing the appeal with relief to the appellant.

Conclusion:
The Tribunal's judgment emphasized the practical challenges of retroactive document production and the Department's responsibility in verifying compliance. It highlighted the importance of considering the factual context and the Assistant Commissioner's role in assessing refund claims, ultimately ordering the balance of refund to be granted to the appellant while setting aside the lower authorities' decisions.