2013 (6) TMI 651 - HC - Central Excise

Refund of unutilzed cenvat credit - Rule 5 of CCR - Notification no. 5/2006 - Held that - the Commissioner of Central Excise (Appeals) completely overlooked the Notification No.7/2010C. E.(N.T.) dated 27.02.2010 and the filing of the refund claim in the revised proforma consequent to Notification No.7/2010C. E.(N.T.) dated 27.02.2010. The Tribunal also while passing the order dated 13.03.2012 has not considered the effect of amendment to Notification No.5/2006 C.E. (N.T.) dated 14.03.2006 by Notification No. 7/2010C.E.(N.T.) dated 27.03.2010. This retrospective effect is given by Section 74 of the Finance Act, 2010. This amendment appears to have done away with 1 1 correlation between input and final product for refund under Rule 5 of Cenvat Rules. Tribunal directed to decide the appeals after considering the effect of the amended Notification No.5/2006 C.E.(N.T.) dated 14.03.2006 on the refund application filed by the appellants. - matter restored before CESTAT.

Summary

Issues:
- Interpretation of Rule 5 of the Cenvat Credit Rules, 2004
- Entitlement to refund of unutilized credit under Rule 5
- Fulfillment of conditions under Notification No. 5/2006
- Requirement of 1:1 correlation between inputs and final products for refund

Interpretation of Rule 5 of the Cenvat Credit Rules, 2004:
The case involved 12 appeals challenging a common order by the Tribunal under Section 35G of the Central Excise Act, 1944. The appellant, engaged in manufacturing various products, filed refund claims under Rule 5 of the Cenvat Credit Rules, 2004, for unutilized credit on inputs used in products cleared for export. Initially, the Assistant Commissioner sanctioned the refund claims, but the Commissioner of Central Excise (Appeals) later allowed appeals by the revenue, citing lack of evidence on credit usage for exports. The Tribunal remanded the matter to the adjudicating authority, emphasizing the need to verify Rule 5 requirements and conditions under Notification No. 5/2006.

Entitlement to refund of unutilized credit under Rule 5:
The Commissioner of Central Excise (Appeals) held that the appellant failed to prove credit usage for exports, leading to disallowance of refund claims. The Tribunal's remand focused on the authority's failure to independently assess the refund applications and the lack of 1:1 correlation evidence between inputs and final products. The appellant argued for a fresh disposal, highlighting an amendment allowing refunds for inputs related to final products, negating the need for 1:1 correlation. The respondent contended that the remand was justified for proper examination of the refund claims.

Fulfillment of conditions under Notification No. 5/2006:
The adjudicating authority, in considering the refund claims, noted the appellant's revised format submissions under Notification No. 7/2010. The authority independently analyzed the correlation between raw materials and exported goods, concluding that a strict 1:1 correlation was unnecessary for refund eligibility. However, the Commissioner of Central Excise (Appeals) overlooked the revised format submission and the Tribunal failed to address the impact of the amendment to Notification No. 5/2006, which eliminated the requirement for 1:1 correlation.

Requirement of 1:1 correlation between inputs and final products for refund:
The Tribunal's oversight of the amendment to Notification No. 5/2006 was a critical aspect overlooked, affecting the core issue of 1:1 correlation between inputs and final products for refund claims. The Tribunal's failure to consider the retrospective amendment by Notification No. 7/2010, which removed the necessity of strict correlation, led to the High Court setting aside the Tribunal's order. The High Court directed the Tribunal to reexamine the appeals in light of the amended notification, emphasizing the elimination of the 1:1 correlation requirement for refund eligibility.