2017 (8) TMI 697 - AT - Central Excise

Refund of untilised CENVAT credit - drawback - respondent had availed duty drawback in respect of Customs duty - Held that - On plain reading of Rule-3, it is clear that the availment of Cenvat credit will prevail over disbursement of drawback. Therefore, on the ground that drawback of Customs duty has been paid to the respondent, refund of Cenvat credit of Central Excise duty paid on inputs and service tax paid on input service under said Rule-5 cannot be denied - refund allowed - appeal dismissed - decided in favor of Respondent-assessee.

Summary

Issues:
Refund claim rejection based on availing duty drawback, interpretation of Rule-5 of Cenvat Credit Rules, 2004, eligibility for refund of Cenvat credit, dispute over Customs portion of drawback, appeal against Order-in-Appeal.

Analysis:
The case involved a dispute regarding the rejection of refund claims by the respondent based on availing duty drawback and the interpretation of Rule-5 of the Cenvat Credit Rules, 2004. The respondent had filed refund claims for inputs used in manufacturing final products under Chapter Heading No. 3005 of the Central Excise Tariff Act, 1985, exported under bond. The refund claims were rejected on the grounds that availing duty drawback under the Customs and Central Excise Duty Drawback Rules, 1995, would disallow refund of Cenvat credit under Rule-5. The Commissioner (Appeals) allowed the appeal, stating that since the appellant had availed only the Customs portion of drawback, they were eligible for refund of Cenvat credit on Central Excise duty paid and service tax on inputs and input services. The Revenue appealed against this decision before the Tribunal.

Upon hearing the parties and examining the records, the Tribunal found that there was no restriction on the refund of Cenvat credit under Rule-5, even if the Customs component of drawback was paid on the exported goods. The Tribunal referred to Rule-3 of the Customs, Central Excise Duties, and Service Tax Drawback Rules, 1995, which stated that the availment of Cenvat credit would prevail over the disbursement of drawback. Therefore, the Tribunal dismissed the appeal filed by the Revenue, concluding that the refund of Cenvat credit for Central Excise duty paid on inputs and service tax paid on input services cannot be denied based on the payment of Customs duty drawback. The respondent-assessee was deemed entitled to consequential relief as per the law, and any cross objections were also disposed of accordingly.