2015 (1) TMI 625 - HC - Central Excise

Refund claim - Unutilized CENVAT Credit - manufacturer/exporter has not tried to utilize the credit for payment of duty - Held that - Goods had been exported under bond without payment of duty. During the relevant period all clearances had been made by the assessee on payment of duty from Modvat account. It had not effected any clearance for export on payment of duty. The Modvat credit on inputs contained in the goods exported was, thus, not capable of being utilized within the meaning of Rule 57F(13) of the Rules. All the conditions required under Rule 57F(13) and notification No. 85/87-C.E., dated 1-3-1987 as amended had been satisfied i.e. export of goods under bond, utilisation of credit of inputs used to manufacture export goods for domestic clearances, inability of the assessee to utilise the Modvat credit as set out in the Modvat scheme and availability of excess credit with the assessee even thereafter. - The findings recorded by the Tribunal have not been shown to be illegal or perverse in any manner. Consequently, the substantial questions of law are answered against the revenue and thus, the appeal is devoid of any merit - Decided against Revenue.

Summary

Issues Involved:
1. Whether the CESTAT was legally correct in holding that cash refund of Modvat credit on inputs used for manufacture of goods exported shall be allowed in cases where the manufacturer/exporter has not tried to utilize the credit for payment of duty on the goods cleared for export or for home-consumption as stipulated under Rule 57F(13) of Central Excise Rules, 1944?
2. Whether the CESTAT was legally correct in holding that it was a mandate on the revenue to allow the manufacturer to utilize the credit of specified duty in respect of inputs towards payment of duty on any final product cleared for home consumption or for export on payment of duty and it was not a mandate on the assessee?

Issue-wise Detailed Analysis:

1. Cash Refund of Modvat Credit:
The appeal involves the question of whether the cash refund of Modvat credit on inputs used for the manufacture of goods exported should be allowed when the manufacturer/exporter has not utilized the credit for payment of duty on goods cleared for export or home consumption. The respondent-assessee, engaged in the manufacture and export of primary batteries and cells, filed refund claims under Rule 57F(13) of the Central Excise Rules, 1944, arguing that they had exported most of their manufactured goods under bond and had unutilized Modvat credit. The Deputy Commissioner rejected the claim, stating that full duty was refundable only when goods were cleared on payment of duty for export under Rule 12(1)(a), and since the goods were exported under bond without payment of duty, the refund claims did not fall under Rule 57F(13) or Rule 12(1)(a). The Commissioner (Appeals) initially remanded the matter for reconsideration, but the claim was again rejected. The Tribunal, however, allowed the appeal, setting aside the Commissioner (Appeals)'s order, and held that the assessee was entitled to a refund of Modvat credit under Rule 57F(13).

2. Mandate on Revenue vs. Assessee:
The second issue revolves around whether it was a mandate on the revenue to allow the manufacturer to utilize the credit of specified duty in respect of inputs towards payment of duty on any final product cleared for home consumption or for export on payment of duty, rather than a mandate on the assessee. The Tribunal found that the interpretation by the Commissioner (Appeals) was incorrect. The Tribunal clarified that the mandate under Rule 57F(13) was on the revenue to allow the manufacturer to utilize the credit of the specified duty towards payment of duty on any final product cleared for home consumption or for export on payment of duty. The Tribunal concluded that the assessee had satisfied all conditions required under Rule 57F(13) and the relevant notifications, such as exporting goods under bond, utilizing credit of inputs used to manufacture export goods for domestic clearances, and having excess credit even thereafter. Therefore, the Tribunal found no reason to deny the refund claim made by the assessee.

Conclusion:
The High Court upheld the Tribunal's decision, finding no merit in the revenue's appeal. The Court agreed with the Tribunal's interpretation that the mandate under Rule 57F(13) was on the revenue and not on the assessee. The Court concluded that the findings recorded by the Tribunal were neither illegal nor perverse, and thus, the substantial questions of law were answered against the revenue. Consequently, the appeal was dismissed.