2018 (5) TMI 1561 - AT - Central Excise

Refund claim - rejection on the ground that some input goods or services cannot be deemed to be used for providing the output services - Held that - Rule 5 of CCR has a formula for sanction of refund of CENVAT credit when goods or services are exported. In this scheme, proportionate refund on the CENVAT credit availed by the appellant during the particular period on input services or goods is available whether or not these goods and services are related to the exported output goods or services. Once input credit is allowed, the exporter is entitled to refund of proportionate amount of CENVAT credit. If the export turnover of the exporter is say 40% of his total turnover during the period, 40% of the net CENVAT credit can be refunded to them. It does not matter which components of the CENVAT credit pertains to which input goods or services. Even if one input service is exclusively used for export and another used for their domestic transactions, the exporter is entitled only the proportionate amount is total CENVAT credit. If the assessee has, in fact availed CENVAT credit on input goods or services wrongly which needs to be recovered, then such amount should have been recovered through a notice under Rule 14 of CENVAT Credit Rules, 2004 and any other relevant provisions and following the appropriate procedure. Rule 5 of CENVAT credit Rules is not an instrument for the purpose. It is proper to remand the matter back to the Deputy Commissioner to decide the refund amount applying the formula given in Rule 5 of CENVAT Credit Rules.

Summary

Issues:
Refund of CENVAT credit under Rule 5 of CENVAT Credit Rules, 2004 read with Notification No. 27/2012-CE (NT) for the period April, 2014 to March, 2015.

Analysis:
The appellant applied for a refund of CENVAT credit and produced necessary documents. The Deputy Commissioner issued a show cause notice questioning the refund claim. After due process, the Deputy Commissioner sanctioned a refund but rejected a portion, stating some input goods or services were not used for providing output services. The appellant appealed to the Commissioner (Appeals) who allowed refund for some input services and disallowed the rest. The appellant challenged this decision, arguing that the refund should be governed by the formula in Rule 5 of CENVAT Credit Rules and Notification No. 27/2012-CE.

The Tribunal analyzed Rule 5 of CENVAT Credit Rules, which provides a formula for refund of CENVAT credit when goods or services are exported. The rule allows a manufacturer or service provider to claim a refund of CENVAT credit based on a specified formula, irrespective of whether the input goods or services are directly related to the exported output goods or services. The Tribunal emphasized that once input credit is allowed, the exporter is entitled to a proportionate refund of CENVAT credit, regardless of the specific input goods or services involved. The Tribunal clarified that if any wrongly availed CENVAT credit needs to be recovered, it should be done through a separate process under Rule 14 of CENVAT Credit Rules, not through the refund mechanism under Rule 5.

Consequently, the Tribunal remanded the matter back to the Deputy Commissioner to determine the refund amount applying the formula specified in Rule 5 of the CENVAT Credit Rules. The Tribunal allowed the appeal by way of remand, emphasizing that the calculation of the refund should strictly adhere to the provisions of Rule 5, and any recovery of erroneously availed credit should follow the appropriate procedure under the law.