2014 (7) TMI 779 - AT - Central Excise

Denial of refund claim - accumulated credit availed on input service - Notification No.5/2006-CE (NT) dated 14.3.2004 issued under Rule 5 of CENVAT Credit Rules, 2004 - appellant is manufacturing exempted goods - appellant filed the refund claim under Rule 5 of the CENVAT Credit Rules, 2004 - Held that - Since the appellant is availing full exemption and not even registered and the exempted goods were not exported under bond, refund has been denied - In fact, it is the appellants who have suffered the loss because of the delay in obtaining registration and not exporting the goods under bond, even though appellant had taken a decision to avail cenvat credit and indicated the same at the time of removal. It is strange to note that Central Excise Officers have certified the availment of cenvat credit even though the appellant was not registered and they had not made any verification whatsoever with regard to availment of cenvat credit - Following decision of WELL KNOWN POLYESTERS LTD. Versus COMMISSIONER OF C. EX., VAPI 2011 (1) TMI 664 - CESTAT, AHMEDABAD - rejection of refund claim on the grounds enunciated are not sustainable - Decided in favour of assessee.

Summary

Issues:
Refund claim rejection under Rule 6 of CENVAT Credit Rules, 2004; Violation of First proviso to Rule 5; Eligibility of CENVAT credit for manufacturing exempted goods.

Analysis:
1. The case involved the appellant's refund claim of accumulated credit on input service used in exporting goods under Rule 5 of the CENVAT Credit Rules, 2004. The show-cause notice proposed rejection under Rule 6, but authorities rejected it based on the First proviso to Rule 5. The appellant argued that the proviso applies to duty, not input service credit, citing relevant case law.

2. The Revenue contended that the show-cause notice mentioned Rule 5 violations, supporting the rejection. They argued against the appellant's failure to renew the Letter of Undertaking (LUT) and claimed lack of evidence regarding drawback claims. The mandatory nature of LUT and procedural compliance were emphasized.

3. The Tribunal analyzed Rule 5, noting the restriction on refund if drawback is availed. The appellant's claim was for input service credit, not drawback. The issue of manufacturing exempted goods and CENVAT credit eligibility under Rule 6 was addressed. The Tribunal referred to precedents supporting refund claims for exempted goods exported without bond or LUT.

4. Referring to the decision in Well Known Polyesters Ltd., the Tribunal held that procedural lapses like LUT non-renewal should not bar credit claims. Precedents emphasized the importance of intended material use and disregarded procedural violations in legitimate refund claims. The Tribunal allowed the appeal, subject to document verification by the adjudicating authority.

5. The judgment concluded by allowing the appeal based on the Tribunal's decision in Well Known Polyesters Ltd., highlighting that procedural requirements should not obstruct valid refund claims. The case illustrated that legitimate claims for refund should not be denied due to procedural lapses when material use for export is established.

This comprehensive analysis highlights the key legal arguments, interpretations of relevant rules, and the application of precedents in resolving the issues raised in the judgment.