2014 (3) TMI 421 - AT - Central Excise

Rejection of refund claim - Utilization of CENVAT Credit - dealer of textile goods - Held that - in the first round of litigation, Commissioner (A) had allowed refund claims for all goods cleared from the factory of the appellant for export and rejected the refund claims only in respect of the goods which were cleared from the premises of the merchant exporters or other manufacturers. Against this, the appellant came in appeal before the Tribunal and that appeal was allowed without any qualification which would imply that the entire refund which was originally asked forgot sanctioned consequent to the order of the Commissioner (A) and further orders of the Tribunal. So a second round of examination of eligibility for refunds was prima facie unwarranted. Further, it is seen that in the second round of proceedings of refund claims, the adjudicating authority as well as the first appellate authority have relied on new grounds for rejecting the refund claims without even putting the appellant on notice. Therefore, on the basis of principles of natural justice also, the orders in the second round of litigation are not maintainable. Option to the dealer of textile goods to pay duty - When such an option is given, it is to be understood that the option is in respect of all matters related to payment of duty as well as claims of refund consequent to exports and the arguments made by the Revenue that only for payment of duty, a dealer of textile goods will be considered as a manufacturer and not for refund of Cenvat credit is not consistent and not in conformity with the policy of the Government to allow export of goods without incidence of taxes - Following decision of Essar Steel Ltd Vs. UOI 2009 (11) TMI 141 - GUJARAT HIGH COURT - Decided in favour of assessee.

Summary

Issues:
Refund claims rejection based on lack of correlation with proof of export documents, denial of refund for goods not removed from appellant's factory, rejection of refund claims for goods cleared by merchant exporters, denial of refund for excise duty paid as a dealer, eligibility of dealer for refund under Rule 5 of Cenvat Credit Rules, 2002.

Analysis:
1. The appellant filed refund claims under Rule 5 of the Cenvat Credit Rules, 2002 for accumulated Cenvat credit on inputs used in exporting goods via different methods. Five show cause notices were issued, citing reasons like lack of proof of not availing draw-back claim, absence of export documents, failure to show credit non-utilization for DTA goods, and missing calculation formula for refund quantification.

2. The Commissioner (Appeals) allowed refund for goods directly exported from appellant's factory but denied it for other export methods. The Tribunal overturned this decision, emphasizing that export goods need not be removed from the factory for refund eligibility under Rule 5, contrary to the Commissioner's stance, citing the case of CCE Vs. UIC Wires Ltd. The Tribunal's order set aside the previous decision.

3. Subsequently, the adjudicating authority reprocessed the refund claims, sanctioning a partial amount and rejecting the rest, citing input calculation and credit utilization reasons. The Commissioner (A) rejected the appeal based on the appellant's dealer status for excise duty refund, not considering them as a manufacturer under Rule 5. The appellant challenged this decision before the Tribunal.

4. The appellant argued that as per Notification No. 34/03-CE, dealers could opt for excise duty payment and Cenvat credit utilization, making them eligible for refunds under Rule 5. The Revenue contended that dealer status precludes refund eligibility, citing Essar Steel Ltd case. The Tribunal noted the inconsistency in rejecting refunds based on new grounds without prior notice and upheld the appellant's eligibility for refund under Rule 5 as a dealer of textile goods.

5. The Tribunal ruled in favor of the appellant, allowing the appeal and granting consequential benefits, provided the Cenvat credit was not utilized for duty payment during the relevant period. The decision emphasized the applicability of Rule 5 to dealers opting for excise duty payment, aligning with the government's policy on tax-free exports and rejecting the Revenue's argument against refund eligibility for dealers.