2008 (7) TMI 129 - AT - Central Excise

Appellant is a manufacturer-exporter - appellants are engaged in the manufacture of cotton fabrics from the input cotton yarn - appellants claimed refund being the unutilized CENVAT credit accumulated on account of exports by them export of fabrics after process of finishing and packing - original authority rejecting the refund claim on the ground that the appellants had exported bought out material without subjecting them to any manufacturing process, is not justified - refund allowed

Summary

Issues:
Refund of unutilized CENVAT credit on exports under bond.

Analysis:
The case involved an appeal by M/s. G.T. Exports against the rejection of their refund claim of unutilized CENVAT credit by the original authority and the Commissioner (Appeals). The dispute arose from the contention that the appellants had exported bought-out material without subjecting them to any manufacturing process, leading to the denial of the CENVAT credit. The appellants argued that the purpose of Rule 5 of the CCR was to ensure that inputs taken as credit are used in the export product, regardless of whether it involved a manufacturing process or not. They claimed that even processes not amounting to manufacture should allow for the credit of duty paid on inputs and subsequent refund on export. The Tribunal considered the appellant's activities, where they subjected purchased fabrics to various processes before export, and concluded that the accumulated credit was admissible for refund under Rule 5 of the CCR.

The Tribunal examined the appellant's status as a manufacturer-exporter who exported fabrics manufactured using input cotton yarn. It was noted that the intention of the Government was to promote exports and relieve export goods from domestic taxes. The Tribunal referred to a previous decision where it was observed that the definition of 'manufacture' under the Central Excise Rules included processes beyond traditional manufacturing activities. Rule 5 of the CENVAT Credit Rules was analyzed, which allowed for the refund of CENVAT credit on inputs used in final products cleared for export under bond. The Tribunal found that the appellants met the criteria for refund as per Rule 5, emphasizing that the purpose was to enable manufacturers/exporters to claim refunds on duty paid for inputs used in export products, regardless of the manufacturing process involved.

In light of the legal provisions and the appellant's activities, the Tribunal concluded that the appellants were eligible for the refund of the CENVAT credit claimed. The decision was based on the interpretation of Rule 5 of the CCR and the overarching objective of promoting exports and facilitating refunds for duty paid on inputs used in export products. The appeal filed by M/s. G.T. Exports was allowed, affirming their entitlement to the refund of accumulated CENVAT credit.