2023 (6) TMI 451 - AT - Central Excise

Refund of accumulated Cenvat Credit - Denial on the ground that, appellant should have utilized the balance of its cenvat credit towards the payment of excise duty on goods manufactured and cleared for home consumption or for export on payment of duty or payment of service tax on output service - period post 31-3-2012 and for the earlier period also - HELD THAT - A plain reading of the Rule 5 would indicate that where any input for input service is used in the manufacture of final product which is cleared for export under Bond or letter of undertaking, the Cenvat credit in respect of the same, so used shall be allowed to be utilized by the manufacturer or provider of output service so used and shall be allowed to be utilized by the manufacturer or provider of output service and if for any reason, such adjustment is not possible, the manufacturer or the provider of output service would be entitled to seek refund of such amount subject to such safeguards, conditions and limitations as may be specified by the Central Government by notification. In terms of Rule 5 of CENVAT Credit Rules, 2004 when a manufacturer is exporting the final product continuously without payment of duty, the CENVAT Credit on inputs-input services would be accumulating to his CENVAT Credit records. Such manufacturer would be entitled to utilize the CENVAT Credit either for payment of excise duty on final products cleared for home consumption or for export on payment of duty or for payment of service tax on output service. If these contingencies are not forthcoming for any reason, then manufacturer/output service provider can seek refund as provided under Rule 5 read with relevant or extant notifications so issued. In the present matter it is not in dispute that entire refund claim in question had been filed under Rule 5 of the rules, which is a beneficial provision for manufacturer who cleared final product or intermediate product for export without payment of duty under bond, etc. The refund of Cenvat credit under Rule5 would be applicable where any inputs are used in the final product which are cleared for export under bond or letter of undertaking, Cenvat credit in respect of the inputs so used shall be allowed to be utilized by the manufacturer towards payment of duty of excise on any final products cleared for home consumption or for export of payment of duty, and whether any reason such adjustment is not possible, manufacturer shall be allowed to refund of such amount. Proviso to Rule 5 imposes a restriction that no refund or credit shall be allowed if the manufacturer avails of drawback claim or claims rebate of duty - In the present case, there is no dispute that the appellant had exported the goods without payment of duty, further, there is no dispute that the appellants have not availed the drawback or rebate of duty, hence the refund of credit shall be allowed, as the amount cannot be adjustable against clearance of home consumption or for export on payment of duty. The Tribunal in the case of JENNTEX ENGG. COMPANY VERSUS COMMISSIONER OF C. EX., COIMBATORE 2008 (10) TMI 108 - CESTAT, CHENNAI , observed that the ground on which refund claim was rejected that the assessee could have exported the goods on payment of duty utilizing credit is a wrong ground and a misdirected one. On a plain reading of Rule 5 of the said Rules, it is clear that the assessee is entitled to claim refund on the accumulated credit where for any reason such adjustment is not possible . Further Tribunal in CCE., MADRAS VERSUS INDIAN STEEL ROLLING MILLS LTD. 1996 (3) TMI 266 - CEGAT, MADRAS , wherein denial of refund of credit accumulated due to exports on the ground that the assessee had also clearances for home consumption was over-ruled on the basis that the relevant notification envisaged granting of refund in such cases once in every quarter and that the appellants therein could not utilize the accumulated credit within a period of 3 months. The appellant will be eligible for refund of accumulated credit under Rule5 of CCR and notifications issued there under subject to the various conditions of that Rule and related notifications being satisfied. Further after 01.04.2012 the refund amount are required to be calculated on the basis of formula prescribed in above rule - While upholding the appellant s contention that they are eligible for refund of accumulated credit under Rule5 ibid, the matter is remanded back to the original authority only to the limited purpose of verifying conditions of Rule and Notification issued there under and calculation of refund amount after 01.04.2012 as per the formula of Rule 5 ibid. Appeal allowed by way of remand.

Summary

Issues Involved:
1. Eligibility for refund of accumulated Cenvat Credit under Rule 5 of Cenvat Credit Rules, 2004.
2. Compliance with conditions and limitations of Rule 5 of Cenvat Credit Rules, 2004.
3. Calculation of refund amount post 01.04.2012.

Summary:

1. Eligibility for refund of accumulated Cenvat Credit under Rule 5 of Cenvat Credit Rules, 2004:
The appellant exported their final products under bond without payment of duty and claimed a refund of accumulated Cenvat Credit as per Rule 5 of Cenvat Credit Rules, 2004. The department issued show cause notices and rejected the claims, which was upheld by the Commissioner (Appeals). The Tribunal found that the appellant is eligible for the refund since the goods were exported without payment of duty and no drawback or rebate was claimed. The Tribunal cited several judgments supporting the appellant's right to refund of accumulated credit when the adjustment is not possible.

2. Compliance with conditions and limitations of Rule 5 of Cenvat Credit Rules, 2004:
The Commissioner (Appeals) rejected the refund claim on the grounds that the appellant could have utilized the Cenvat Credit for home consumption or export on payment of duty. However, the Tribunal disagreed, stating that Rule 5 allows for a refund when such adjustment is not possible. The Tribunal emphasized that the provision is a beneficial one and should not be narrowly interpreted to deny the substantive right of the appellant.

3. Calculation of refund amount post 01.04.2012:
The Tribunal noted that after 01.04.2012, the refund amount must be calculated based on the formula specified in Rule 5 of the Cenvat Credit Rules, 2004. The matter was remanded back to the adjudicating authority to verify the conditions of the Rule and related notifications and to calculate the refund amount as per the prescribed formula.

Conclusion:
The impugned order was set aside, and the matter was remanded to the adjudicating authority to decide the refund claims afresh, considering the Tribunal's observations and after providing an opportunity of hearing to the appellant. The appeals were allowed by way of remand.