2016 (2) TMI 778 - AT - Central Excise

Refund claim of amounts remained unutilized in the CENVAT Credit account - refund claim on the ground that they had exported the fabrics processed by them - Held that - In this case, the appellant had stock of grey fabrics lying in his factory premises filed declaration with the authorities and the said stock has been verified and found to be correct. The appellant had availed the CENVAT Credit of this stock, as provided under Rule 9A(3) of the Cenvat Credit Rules, 2002 and it is not disputed. It is also not disputed that the appellant has exported the entire fabrics manufactured by them, hence they are not in a possession to utilize the CENVAT Credit availed as there is no home clearances. Thus rejection of refund claim by the authorities is not in consonance with the law. Also the learned Counsel was correct in stating that the issue of availment of CENVAT Credit under Rule 9A of the Cenvat Credit Rules, 2002 on the goods lying in stock has been settled by this Bench in the case of P.K. International . 2014 (10) TMI 126 - CESTAT MUMBAI The interest claim by the appellant on amount of ₹ 79,177/- is required to be allowed as the appellant has contested the issue on which interest is to be paid. As regards the claim of the learned Counsel for interest of the balance amount of refund which was sanctioned by the adjudicating authority. As find that the adjudicating authority and there are no findings by the adjudicating authority. At the same time, there cannot be second opinion that if the refund is delayed by the department, the interest liability arises in order to meet end of justice. I hold that the interest liability arises in order to meet end of justice. The interest liability on the amount which has been sanctioned to the appellant needs to be granted from the date when the matter was remanded back by this Bench by order dated 15.6.2007.

Summary

Issues:
Refund claim under Rule 9A of Cenvat Credit Rules, 2002 for unutilized amounts in CENVAT Credit account due to export of fabrics.

Analysis:
The appeal challenged Order-in-Appeal No. SB/69/Th-I/10 dated 20.5.2010 by the Commissioner of Central Excise (Appeals), Mumbai -I. The appellant sought a refund claim for unutilized amounts in the CENVAT Credit account due to exporting processed fabrics. Initially, the adjudicating authority rejected the claim citing ineligibility under Rule 9A of the Cenvat Credit Rules, 2002. However, upon remand, the authority approved a partial refund but disallowed a portion due to lack of duty paying documents, a decision upheld by the first appellate authority.

The appellant argued that Rule 9A allows CENVAT Credit even without documents if inputs are procured from the market and claimed credit based on Rule 9A(3) calculations. Citing precedent, the appellant contended that credit under Rule 9A(2) is valid even without duty paying documents. The Revenue argued that the ownership of grey fabrics in the factory premises was crucial for credit eligibility under Rule 9A(2).

The Tribunal found the rejection of the refund claim for a specific amount incorrect for multiple reasons. The show-cause notice inaccurately cited Rule 9A for disallowing the refund, whereas Rule 3 governs such claims. The authorities failed to consider the appellant's argument regarding utilizing Rule 9A(2) credit for duty liability on exported goods. The Tribunal noted that the appellant had correctly availed credit under Rule 9A(3) for grey fabrics without dispute. As the appellant exported all manufactured fabrics, the unutilized credit was eligible for refund. Precedent and the law supported the appellant's position, leading to the appeal's allowance with consequential relief.

Regarding interest, the Tribunal held that interest on the disputed refund amount should be granted due to the appellant contesting the issue. Additionally, interest on the sanctioned refund amount was deemed necessary due to the delay caused by the department. The interest liability was established from the date of the matter's remand in 2007.

In conclusion, the Tribunal set aside the impugned order, allowed the appeal, and directed the grant of interest on both the disputed and sanctioned refund amounts from the respective dates.