2017 (7) TMI 188 - AT - Central Excise

Refund of accumulated CENVAT credit - accumulation of credit due to variation of rate of duty between inputs and final product - denial on the ground that firstly refund under Rule 5 of Cenvat Credit Rules shall not be applicable in case the assessee claim rebate or drawback. Secondly, the Rule 5 is applicable only in case where the export is made under bond - Held that - The accumulation of Cenvat Credit is not due to export of goods as the export of goods was made on payment of duty refund under Rule 5 of Cenvat Credit Rules, 2004 is admissible only when the accumulation is due to non-payment of duty on the export goods that means if the goods is cleared under bond then due to non-payment of duty the cenvat credit gets accumulated and the same is refunded under Rule 5, as per the input output ratio between the export goods and the input used, the Rule 5 provides the refund of accumulated credit only in case the export of goods made under bond and not in the case of export under rebate - Moreover, there is a condition in the notification under Rule 5 that the refund shall not be applicable when the assessee claims the rebate of duty drawback. The refund was rightly denied to the appellant as the same is not governed by Rule 5 of CCR, 2004 - appeal dismissed - decided against appellant.

Summary

Issues Involved:
Manufacture and export of pharmaceutical products, accumulation of cenvat credit, refund under Rule 5 of Cenvat Credit Rules, denial of refund by lower authorities, export under rebate, export under bond, eligibility for refund under Rule 5, submission of refund claim, denial of refund claim, provisions of Rule 5 of CCR Rules, 2004, export under Bond or LUT, denial of refund on various grounds, applicability of Rule 5 in the case, accumulation of Cenvat credit due to inverted duty structure, case laws comparison, duty structure of exported goods, denial of refund by Commissioner (Appeals), sustainability of refund claim.

Analysis:

The appellant, engaged in the manufacture and export of pharmaceutical products, claimed a refund of accumulated cenvat credit due to the difference in duty rates between inputs and final products under Rule 5 of the Cenvat Credit Rules, 2002. The lower authorities denied the refund citing that Rule 5 does not apply if the assessee claims rebate or drawback and is only applicable when export is made under bond. The appellant challenged this denial before the appellate tribunal. Despite the appellant's absence, the tribunal proceeded to decide the appeal on merit.

The Assistant Commissioner representing the Revenue reiterated the findings of the impugned order. The tribunal observed that the appellant exported goods mainly under rebate on payment of duty, with a negligible percentage under bond without duty payment. The appellant filed a refund claim for accumulated cenvat credit under Rule 5 of the CCR, 2004, facing rejection on grounds like failure to provide details of inputs used in export under bond, exporting goods under rebate, and not satisfying conditions of the notification for refund.

The main issue revolved around the provisions of Rule 5 of the CCR Rules, 2004, governing the refund of cenvat credit for goods cleared for export under bond or LUT. The tribunal examined the applicability of Rule 5, emphasizing that it only covers inputs used in products exported under bond or LUT, not under rebate. In this case, the final product was exported under rebate, leading to the accumulation of cenvat credit due to an inverted duty structure, not export under bond.

The tribunal differentiated this case from previous judgments where goods were exported under bond, highlighting that Rule 5 aims to refund duties paid on inputs for goods exported without duty payment. Since the final product was not exported under bond or LUT, Rule 5 was deemed inapplicable. The tribunal upheld the denial of refund by the Commissioner (Appeals) as per Rule 5 of the Cenvat Credit Rules, 2004, and the related notification, ultimately dismissing the appeal.