2012 (11) TMI 825 - AT - Central Excise

Refund of unutilized Cenvat credit - inputs used in manufacture of Polyester Staple Fiber (PSF) exported under Bond/Letter of Undertaking - Held that - As examined in SHELL INDIA MARKETS PVT. LTD. Versus COMMISSIONER OF C. EX., BANGALORE 2012 (10) TMI 34 - KARNATAKA HIGH COURT it is necessary to verify not only that particular input service is consumed for providing particular output service but also that eligible service received under various invoices have actually gone into consumption for providing impugned exported output service and not utilized for other purposes. Though these observations of Hon ble High Court are in respect of input services, these are squarely applicable to inputs also as under Rule 5 of the Cenvat Credit Rules inputs and input services are treated at equal footing. Thus refund of Cenvat credit in respect of inputs is admissible if those inputs have actually gone into consumption of exported goods. The matter needs to be remanded back to the original authority for adjudicating the matter afresh in view of the decision of the in the case of Shell India Markets Pvt. Ltd. (supra).

Summary

Issues Involved:
1. Eligibility for refund of unutilized CENVAT credit under Rule 5 of the CENVAT Credit Rules, 2004.
2. Utilization of CENVAT credit and carry-forward balance.
3. Higher duty on inputs than final products.
4. Refund claims under the Advance Authorization Scheme.
5. Refund of CENVAT credit for duty-free inputs under DEEC/Advance Authorization Scheme.
6. Compliance with Foreign Trade Policy and relevant notifications.

Detailed Analysis:

1. Eligibility for Refund of Unutilized CENVAT Credit:
The appellants filed five refund claims under Rule 5 of the CENVAT Credit Rules, 2004, for unutilized CENVAT credit on inputs used in the manufacture of Polyester Staple Fiber (PSF) exported under Bond/Letter of Undertaking. The adjudicating authority initially sanctioned four claims but rejected one. The Commissioner (Appeals) later allowed the Revenue's appeal against the sanctioned refunds and upheld the rejection of the fifth claim. The Tribunal noted that Rule 5 allows for the refund of CENVAT credit if the manufacturer cannot utilize it for home consumption or export duty payments.

2. Utilization of CENVAT Credit and Carry-Forward Balance:
The Revenue argued that the appellant regularly utilized CENVAT credit and carried forward the balance, implying they could utilize the accumulated credit, thus disqualifying them from refunds. The appellant contended that there is no requirement for one-to-one correlation between inputs and exported goods for claiming refunds.

3. Higher Duty on Inputs than Final Products:
The Revenue claimed that the higher duty on inputs compared to the final products would result in a disproportionate benefit to the appellant, contrary to the scheme's intention. The appellant countered that the actual consumption norms were stricter than those specified by the DGFT and supported their claim with a Chartered Accountant Certificate.

4. Refund Claims under the Advance Authorization Scheme:
The Revenue contended that the appellant claimed benefits under the Advance Authorization Scheme, which should disqualify them from refunds under Rule 5 of the CENVAT Credit Rules. The appellant argued that Rule 5 does not bar exports under the DEEC Scheme from claiming refunds and cited case laws supporting their stance.

5. Refund of CENVAT Credit for Duty-Free Inputs under DEEC/Advance Authorization Scheme:
The Revenue asserted that inputs procured under the DEEC/Advance Authorization Scheme did not suffer duty, and thus, refunds on these inputs were inadmissible. The appellant maintained that actual use of duty-free inputs in export goods was not necessary under the Foreign Trade Policy, and refunds were permissible under Rule 5.

6. Compliance with Foreign Trade Policy and Relevant Notifications:
The Tribunal referred to the Foreign Trade Policy and relevant notifications, emphasizing that refunds are subject to safeguards, conditions, and limitations specified by the Central Government. The Tribunal cited the Karnataka High Court's judgment in Shell India Markets Pvt. Ltd., which required verification that inputs or input services were used in the manufacture of exported goods.

Conclusion:
The Tribunal concluded that the matter needed to be remanded back to the original authority for fresh adjudication, considering the Karnataka High Court's decision. The Tribunal set aside the impugned orders and directed the original authority to re-evaluate the claims after providing an opportunity for hearing to the appellants. All appeals and the Stay Petition were disposed of accordingly.