2022 (6) TMI 429 - AT - Central Excise

100% EOU - Partial rejection of claim for refund preferred under rule 5 of CENVAT Credit Rules, 2004 - inclusion of credit that had been restored consequent upon rejection of claims for previous periods in the computation of entitlement in subsequent claims - April 2016 to June 2016, July 2016 to September 2016 and October 2016 - HELD THAT - Rule 5 of CENVAT Credit Rules, 2004 has been specially formulated for neutralizing tax/duty paid on input service/input used for generating exports. The disposal of claims for refund under this provision is, as already premised, is limited to ascertainment of quantum of exports and the application of the formula prescribed for ascertainment of attribution of such input service/input to exports. Any amount not sanctioned is to be recredited in the CENVAT credit account on the presumption of credit having been correctly availed under rule 3 of CENVAT Credit Rules, 2004 and, in the absence of proceedings initiated under the authority of rule 14 of CENVAT Credit Rules, 2004, availment of credit is not to be revisited. Therefore, the denial of refund on the presumption of ab initio ineligibility will not stand and refund procedure cannot be claimed to be a substitute for recovery. The denial on these grounds is without authority of law. Denial owing to padding up of eligible CENVAT credit of earlier periods that had to be re-credited following rejection of refund claim to that extent - HELD THAT - An assessee such as the appellant, manufacturing primarily for the international market, has little scope for utilization of CENVAT credit in the normal course of discharge of duty liability. It is not the case of Revenue that the appellant had cleared goods domestically on payment of duty and was, through the refund route, attempting to recover the same; there is a certain lack of logic too in that. Any remnant by application of formula, and its precise intendment, can trace its origin to input lying unutilized or input service yet to be utilized for manufacture. Its utilization in some subsequent period can be reflected only by restoration of the rejected portion of a claim for refund. The restoration is permitted by law and the availment suffices to entitle inclusion for apportionment towards export of a subsequent quarter. The claim of the appellant has been wrongly discarded by the lower authorities - Appeal allowed - decided in favor of appellant.

Summary

Issues:
Partial rejection of claim for refund under rule 5 of CENVAT Credit Rules, 2004 and inclusion of restored credit in subsequent claims.

Analysis:
1. The appeals arose from the rejection of refund claims by the first appellate authority for three periods. The primary issues highlighted were the ineligibility of the claim due to infirmities and the inclusion of restored credit in subsequent claims. The appellant, an export-oriented unit, sought refund of accumulated CENVAT credit under rule 5 of the CENVAT Credit Rules, 2004. The rejection of claims was based on two main reasons: ineligibility and inclusion of restored credit in subsequent claims.

2. The rejection of the refund claims was challenged on the grounds that the denial was not supported by law. The appellant argued that the denial based on presumed ineligibility without recourse to rule 14 of the CENVAT Credit Rules, 2004 was unjustified. The formula for refund computation aims to ensure that credit of taxes/duties paid is utilized for export goods. The appellant contended that the denial of refund on the presumption of ineligibility lacked legal authority.

3. The denial of specific refund amounts for different quarters was examined. Reasons for denial included revision in export turnover, non-acceptance of invoices, and procedural lapses. The appellant contested these denials, citing discrepancies in turnover computation, partial credit mismatch, and non-submission of invoices. The denial based on procedural lapses and mismatch was argued to be unjustified.

4. The appellant's claim was further supported by the argument that restored credit from earlier periods should be included in subsequent claims as per the provisions of rule 5 of the CENVAT Credit Rules, 2004. The appellant relied on precedents and legal interpretations to support the inclusion of restored credit in subsequent refund claims. The denial of the claim based on the inclusion of restored credit was deemed incorrect.

5. The Tribunal found that the appellant, being primarily focused on international markets, had limited scope for utilizing CENVAT credit domestically. The denial of the refund claim without proper legal basis was overturned, and the appeal was allowed. The lower authorities' decision to reject the claim was set aside.

In conclusion, the judgment addressed the issues of partial rejection of refund claims and the inclusion of restored credit in subsequent claims under the CENVAT Credit Rules, 2004. The appellant's arguments regarding ineligibility, procedural lapses, and the inclusion of restored credit were examined, leading to the decision to allow the appeal and set aside the lower authorities' rejection of the refund claim.