2008 (7) TMI 340 - AT - Central Excise

Exports EOU - refund claims have been rejected on the grounds that in ARE-1 a declaration was made that Cenvat credit has not been availed by the appellant and the input services utilized by the appellant have been utilized after the place of removal declaration in ARE-1 is not required u/r 5 of CCR 2004 so remarks in ARE-1 not affects refund claim in respect of refund of credit of service tax matter is required to be examined in detail by following Instructions of the Board issued in 2007 regarding place of removal

Summary

Issues:
Appeal against disallowance of refund claim for 100% EOU exporting all clearances.

Analysis:
The appellant, a 100% EOU, filed a refund claim which was rejected by the Commissioner (Appeals) based on the declaration made in ARE-1 that Cenvat credit was not availed and input services were utilized after the place of removal. The appellant argued that Rule 5 of Cenvat Credit Rules allows for refund if credit cannot be adjusted for duty payment on finished goods or output services. They claimed the rejection was solely due to a clerical mistake in the declaration. The appellant cited precedents like Pee Vee Textile Ltd. v. CCE, Nagpur and Navbharat Industries v. CCE, Thane to support their case that refund should be granted if accumulated credit pertains to exported goods and procedures are followed.

The SDR contended that the declaration in ARE-1 is final and crucial, emphasizing the need for proper record maintenance. He also highlighted that the refund claim for a specific period without exports was inadmissible and questioned the correctness of service tax paid on input services.

The Member (T) disagreed with the Commissioner (Appeals) and ruled in favor of the appellant. It was noted that Rule 5 does not mandate a specific declaration in ARE-1 regarding credit availed. The focus should be on verifying the correctness of credit, eligibility for refund, and actual export of goods. Declarations in ARE-1 serve various purposes and are not solely determinative of refund eligibility. The judgment emphasized facilitating legitimate export benefits without unnecessary delays.

Regarding input services, the Commissioner (Appeals) failed to provide detailed reasoning for their ineligibility for refund, merely citing post-removal utilization without verification. The case was remanded to the original authority for a fresh review, ensuring admissibility of Cenvat credit, proper record-keeping, and consideration of input services eligibility. Instructions from the Board on the place of removal were to be followed, with a specific mention that the ARE-1 declaration of credit availed should not impact the refund claim.

In conclusion, the judgment favored the appellant's refund claim, highlighting the importance of procedural adherence, legitimate entitlement to benefits, and thorough verification before disallowing refunds based on technicalities or clerical errors.