2006 (3) TMI 6 - AT - Central Excise

Refund of the accumulated credit - Notification No. 11 /02-C.E. (N.T.) - credit in terms of Rule 5 - Denial on the ground that computation of the amount of credit was on average basis; that the assessee have not utilized the credit for subsequent clearances; that Rule 5 is not applicable in respect of the credit availed on one time basis in terms of the provisions of Rule 9A - HELD THAT - We agree with the id. Advocate appearing for the appellant that the provisions of Rule 5 relating to refund of Modvat credit accumulated in the records on account of their non utilisation for the exported goods is a beneficiary piece of legislation the refund arising on account of the same cannot be denied being a substantive right of the citizen. The wording of Rule 5 read with Rule 3 are very clear providing for refund of accumulated Modvat credit if the same cannot be adjusted for any reason. As such the only condition in the said Rule is non-utiisation of the credit and no-jurisdiction vests in the Central Excise officer to find out the reason for such non-adjustment. The use of the expression that where for any reason such adjustment is not possible the manufacturer shall be allowed refund of such amount is an unlimited expression and cannot be narrowed or curtailed down by the departmental authorities. Thus we set aside the impugned order and hold that the appellant is entitled to the refund of the accumulated credit which shall be quantified by the authority below after looking into their records for which purposes we remand the matter to the original adjudicating authority. The appeal is disposed of in above terms.

Summary

Issues:
Refund claims under Rule 5 of Cenvat Credit Rules, 2002 rejected by authorities - Applicability of Rule 5 in the case - Utilization of Modvat credit for export clearance - Rejection of refund claims by Deputy Commissioner and Commissioner (Appeals) - Availment of transitional credit under Rule 9A - Denial of refund for transitional credit - Interpretation of Rule 5 and Rule 3(2) - Jurisdiction of Central Excise officer in refund cases.

Analysis:
The dispute in the present appeal revolves around the refund claims filed by the appellant under Rule 5 of the Cenvat Credit Rules, 2002, which were rejected by the authorities below. The appellant, engaged in processing textile fabrics and exporting them under bond, accumulated Modvat credit due to the duty rate disparity between inputs and final products. The original adjudicating authority and the Commissioner (Appeals) rejected the refund claims citing reasons like average basis computation, non-utilization for subsequent clearances, and inapplicability of Rule 5 for one-time credit availed under Rule 9A.

The Tribunal examined Rule 5 of the Cenvat Credit Rules, 2002, which allows the utilization of credits for duty on final products cleared for home consumption or export. The Central Government's Notification No. 11/02-C.E. (N.T.) specifies safeguards and conditions for refund claims, permitting monthly claims for export clearance of textile articles. The Tribunal noted that the objection that the appellant could have used the credit for future clearances was erroneous, as the rule allows for refunds if adjustment is not possible within a month.

Regarding the transitional credit availed under Rule 9A, the authorities had denied the refund, contending it couldn't be granted under Rule 5. However, the Tribunal found that Rule 3(2) enables credit on inputs lying in stock, and the notification under Rule 9A quantifies the credit amount. As the transitional credit was availed under Rule 3, the Tribunal held it was covered by Rule 5, emphasizing that the refund of accumulated Modvat credit is a substantive right, and non-utilization is the only condition for refund.

The Tribunal agreed with the appellant's advocate that Rule 5 is a beneficial legislation allowing refunds for unutilized Modvat credit, and the reason for non-adjustment is not a jurisdictional concern for the Central Excise officer. The Tribunal set aside the impugned order, ruling in favor of the appellant's entitlement to the refund of accumulated credit, remanding the matter for quantification by the original adjudicating authority based on their records.

In conclusion, the Tribunal disposed of the appeal by granting the appellant the right to the refund of accumulated credit, emphasizing the clear provisions of Rule 5 and Rule 3, and the substantive nature of the refund entitlement without the need for justification beyond non-utilization.