2016 (12) TMI 712 - AT - Central Excise

Refund claim - manufacture of Tray Cart System - As the appellants did not clear any goods in DTA and had exported entire quantity of Tray Cart Systems manufactured and the Cenvat credit taken on the inputs could not be utilised. The appellants filed refund claims for refund of accumulated Cenvat credit to the tune of ₹ 30,94,591/- - whether Cenvat credit of duty paid on inputs used in the manufacture of exempted final product is admissible when goods are cleared for export under bond? Held that - In the case of Union of India Vs Sharp Menthol India Ltd 2015 (1) TMI 623 - SUPREME COURT the Apex Court had occasion to consider the similar issue, which has also been decided in favour of the assessee by dismissing the appeal filed on the part of Revenue. The Hon ble High Court of Bombay, in the case of UOI Vs Sharp Menthol India(Ltd) 2011 (4) TMI 27 - BOMBAY HIGH COURT held that assessee is entitled to the credit of the duty paid on inputs viz. Menthol used in the manufacture of exempted goods ie menthol crystal which were exported under bond without payment of duty. Such cases are covered under Rule 6(6)(V) of Central Excise Rules,2002 and not under Rule 6(1)(6)(4) of Cenvat Credit Rules, 2004. Following the same, I hold that the first ground raised in the show cause notice for rejection of refund is not sustainable. The goods having been exported, it is immaterial whether the accumulated credit has been show as receivable/advances and the appellant is eligible for refund of accumulated credit in terms of Rule 5 of Cenvat Credit Rules, 2004 - I hold that appellant is eligible for refund - appeal allowed - decided in favor of appellant-assessee.

Summary

Issues:
1. Admissibility of Cenvat credit on inputs used in the manufacture of exempted final products when goods are cleared for export under bond.
2. Rejection of refund claim based on the ground that the finished goods attract a 'nil' rate of duty and lack of evidence showing accumulated Cenvat credit as 'receivable' in the balance sheet.

Analysis:
1. The appellants, engaged in manufacturing equipment for "Green Houses," primarily Tray Cart Systems, exported the entire quantity manufactured under ARE-1 through Merchant-Exporters. They claimed a refund of accumulated Cenvat credit amounting to ?30,94,591. The refund claim was rejected on the basis that the finished goods attracted a 'nil' rate of duty, thus disallowing credit on inputs used in the manufacture of exempted goods. The Original authority and Commissioner(Appeals) upheld this rejection.

2. The appellant argued that since the goods were exported under bond as per Central Excise Rules, they should be eligible for credit regardless of whether the goods were dutiable or exempted. The appellant cited precedents like Repro India Ltd. Vs Union of India, CCE Vs Drish Shoes Ltd., and Arwind Ltd. Vs CCE Ahmedabad to support their claim. The respondent reiterated the findings in the impugned order.

3. The Member (Judicial) analyzed the issue of admissibility of Cenvat credit on inputs used in the manufacture of exempted final products when goods are cleared for export under bond. Referring to the decisions in Union of India Vs Sharp Menthol India Ltd and UOI Vs Sharp Menthol India(Ltd), it was established that the appellant was entitled to the credit of duty paid on inputs used in the manufacture of exempted goods exported under bond. The Member held that the first ground for rejecting the refund claim was not sustainable. It was concluded that the appellant is eligible for a refund of accumulated credit as per Rule 5 of Cenvat Credit Rules, 2004.

4. Ultimately, the Member (Judicial) allowed the appeal, setting aside the impugned order rejecting the refund claim. The appellant was deemed eligible for the refund with consequential reliefs, if any. The judgment was dictated and pronounced in open court.