2017 (12) TMI 1195 - AT - Central Excise

Refund of accumulated Cenvat Credit - Rule 5 of CCR - N/N. 5/2006-CE(NT) - Held that - In terms of Rule 5 and N/N. 5/2006-CE(NT) issued thereunder the refund claim under this provision can be sanctioned only in respect of accumulated cenvat credit, which the assessee is not in a position to utilize for the clearance of goods in home consumption that means the cenvat credit should lie unutilized in the account of the assessee - In the present case, the cenvat credit was utilized by the appellant before sanction thereof. Since, the amount of cenvat credit has been utilized there is no question of refund of the said amount under Rule 5 of CCR, 2004 - appeal dismissed - decided against appellant.

Summary

Issues:
Refund claim under Rule 5 of Cenvat Credit Rules, 2004; Utilization of cenvat credit before sanction; Contravention of Rule 5; Recovery of erroneously refunded amount; Disallowance of refund; Demand of interest and penalty.

Analysis:
The appellant filed a refund claim under Rule 5 of Cenvat Credit Rules, 2004 for a specific amount, which was later revised and resubmitted. The claim was initially rejected but later allowed by the Commissioner (Appeals), resulting in the refund of a certain amount to the appellant. However, during a scrutiny of the appellant's Cenvat account balance, it was found that the appellant had utilized a significant amount of cenvat credit before the refund was sanctioned, leading to a contravention of Rule 5 and the provisions of a relevant notification. Consequently, a show cause notice was issued for the recovery of the erroneously refunded amount.

The adjudicating authority disallowed the amount in question and ordered its recovery under Rule 14 of Cenvat Credit Rules, 2004, along with the imposition of interest and penalty. The appellant, aggrieved by this decision, filed an appeal which was rejected, leading to the current appeal before the Tribunal.

Despite the appellant's absence during the proceedings, their argument was that the cenvat credit had been reversed at the time of refund sanctioning, as it was an accumulated credit at the time of the refund claim. They contended that even though the credit was subsequently utilized, the refund should not be denied on this basis.

The Additional Commissioner representing the Revenue reiterated that as per Rule 5 and the relevant notification, a refund is only admissible when the cenvat credit is accumulated and not utilized for any other purpose. Since the credit had been utilized before the sanctioning of the refund, it was contended that the refund was not admissible to the extent of the credit amount utilized.

After considering the submissions and perusing the records, the Tribunal upheld the impugned order. It emphasized that the refund under Rule 5 is applicable only when the credit is unutilized and the assessee is unable to use it for any other purpose, such as in the case of exporting goods under bond without duty payment. Since the appellant had used the accumulated credit before the sanctioning of the refund, the Tribunal concluded that the refund was not permissible under Rule 5. The decision of the Commissioner was supported, and the appeal was dismissed.