2014 (9) TMI 735 - AT - Central Excise

Refund of CENVAT Credit towards AED (T&TA) credit - export of production about 92%, under bond without payment of duty under Rule 19 of the Central Excise Rules, 2002 - Whether encashment of the Cenvat credit in respect of the inputs used in the manufacture of finished goods, which were not exported, but were cleared for home consumption is encashable in terms of Rule 5 of the Cenvat Credit Rules - Held that - the encashment of AED (T&TA) credit has been correctly denied by the Assistant Commissioner and as such the impugned order of the Commissioner (Appeals) permitting encashment of this credit is not correct. Encashment of credit in respect of inputs contained in waste cleared for home consumption - Held that - the encashment of this credit is also not permissible and the same has been correctly disallowed by the Assistant Commissioner. - Decided in favour of Revenue.

Issues:
1. Refund of unutilized Cenvat credit under Rule 5 of the Cenvat Credit Rules, 2002/2004.
2. Eligibility of encashment of Cenvat credit in respect of inputs used in the manufacture of finished goods exported.
3. Disallowance of refund claim by the Assistant Commissioner.
4. Appeal against the order-in-appeal by the Commissioner (Appeals).

Issue 1: Refund of unutilized Cenvat credit under Rule 5 of the Cenvat Credit Rules, 2002/2004

The case involved a dispute regarding the refund of unutilized Cenvat credit under Rule 5 of the Cenvat Credit Rules, 2002/2004. The respondent, a manufacturer of Rayon Tyre Cord Yarn and Tyre Cord Fabric, exported a significant portion of their production without payment of duty. The respondent sought a cash refund of unutilized Cenvat credit amounting to Rs. 26,84,919, comprising both basic excise duty (BED) and additional excise duty (AED). The Jurisdictional Assistant Commissioner disallowed a portion of the refund claim, leading to an appeal.

Issue 2: Eligibility of encashment of Cenvat credit in respect of inputs used in the manufacture of finished goods exported

The main contention revolved around the eligibility of encashment of Cenvat credit concerning inputs used in the manufacture of finished goods exported. The Rule specified that encashment is permissible only for credit related to inputs used in the manufacture of goods cleared for export. The Assistant Commissioner correctly noted that a portion of the AED credit sought for encashment was related to inputs used in goods cleared for home consumption, making it ineligible for encashment. The Commissioner (Appeals) had allowed encashment of this credit, leading to the current appeal.

Issue 3: Disallowance of refund claim by the Assistant Commissioner

The Assistant Commissioner disallowed a portion of the refund claim, specifically citing that the AED credit related to inputs used in goods cleared for home consumption was not eligible for encashment under Rule 5 of the Cenvat Credit Rules. Additionally, the encashment of credit related to inputs contained in waste cleared for home consumption was also deemed impermissible. The Commissioner (Appeals) overturned this decision, prompting the appeal by the Revenue.

Issue 4: Appeal against the order-in-appeal by the Commissioner (Appeals)

The appeal was primarily against the order-in-appeal by the Commissioner (Appeals), who had allowed the encashment of certain Cenvat credits that the Assistant Commissioner had deemed ineligible. The Revenue contended that encashment was only permissible for credits related to inputs used in goods exported, not those used in goods cleared for home consumption. The arguments centered on the correct interpretation and application of Rule 5 of the Cenvat Credit Rules.

This judgment delves into the nuances of Cenvat credit refund under Rule 5 of the Cenvat Credit Rules, specifically focusing on the eligibility of encashment concerning inputs used in goods exported versus those used in goods cleared for home consumption. The decision underscores the importance of adhering to the specific provisions of the Rule to determine the permissible encashment of Cenvat credits, ultimately upholding the Assistant Commissioner's disallowance of certain refund claims.

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