2016 (6) TMI 1095 - AT - Central Excise

Refund claim - Rule 5 of the CENVAT Credit Rules, 2004 - Refund was rejected on the ground that the average export clearance of final products of the appellant in the preceding quarter was less than 50% of the total clearance and did not satisfy the condition in Notification No. 5/2006 (C.E.) N.T. dated 14.3.2006. - Held that - It is clear from the notification No. 11/2002-CE (NT) dated 11.02.2002 that the requirement of showing the value of export clearances to be more than 50% is applicable only to a manufacturer/assessee who wants to file refund claim more than once in a quarter. The interpretation resorted by the authorities is to the effect that every manufacturer who files refund claim under Rule 5 has to necessarily show that his export clearances are 50% or more which is an incorrect interpretation. The refund has been denied on such incorrect interpretation of the notification. The appellants have established a case in their favour - Refund allowed - Decided in favor of assessee.

Summary

Issues:
Refund claim rejection based on export clearance percentage.

Analysis:
The appellants, engaged in manufacturing Poly Propylene Filament Yarn and availing CENVAT Credit, filed a refund claim for exported goods. The claim was rejected as the average export clearance of final products in the preceding quarter was below 50%. The appellants argued that the condition in Notification No. 5/2006 was misinterpreted, and the correct notification applicable was No. 11/2002. The key difference between the two notifications was the percentage requirement. The department contended that the appellants did not meet the 50% export clearance threshold. However, the tribunal disagreed, stating that the 50% requirement applies only when filing a refund claim more than once in a quarter, which was not the case here. The rejection was based on an incorrect interpretation of the notification.

The appellants further argued that the export clearance percentage was a procedural requirement, and the substantive benefit of refund should not be denied for procedural lapses. They cited precedents to support their argument. The tribunal agreed that the requirement of showing export clearances exceeding 50% applied only to manufacturers filing refund claims multiple times in a quarter. The authorities' interpretation, requiring all manufacturers to meet the 50% threshold, was deemed incorrect. The tribunal found in favor of the appellants, stating that they had met the conditions for the refund claim. Consequently, the impugned order was deemed unsustainable, and the appeals were allowed.