2019 (11) TMI 52 - AT - Central Excise

Refund of un-utilised CENVAT Credit - total amount of claim had been reduced by applying the formula prescribed under Rule 5 of CENVAT Credit Rules, 2004 - Cash refund relating to the segments and castings were rejected on the ground that the same were capital goods - HELD THAT - This Tribunal for the earlier period in M/S. COGNIZANT TECHNOLOGY SOLUTIONS VERSUS CCE ST (LTU) , CHENNAI 2016 (2) TMI 580 - CESTAT CHENNAI , held that the formula adopted by the Revenue is incorrect having two values in the numerator and the denominator. Pursuant to the said remand order, the Adjudicating authority has adopted the FOB value in the numerator as well as in the denominator. Therefore, the present appeals are also remanded to the Adjudicating authority to calculate the refund claim by adopting the uniform value in the numerator as well as the denominator of the formula prescribed under Rule 5 of CENVAT Credit Rules, 2004. Admissibility of CENVAT Credit - segments and castings HELD THAT - Undisputedly, it is classified under Chapter sub-heading 84399100 of Central Excise Tariff Act, 1985 as capital goods . Merely because the said capital goods gets exhausted after it is used in grinding the materials of approximately 150 MTs, it cannot be classified as an input used for manufacture of finished goods viz. Bagassae Board falling under Chapter 44 of Central Excise Tariff Act, 1985. Thus, the cash refund of ₹ 3,69,874/- on the Segments has been correctly denied under Rule 5 of CENVAT Credit Rules, 2004 and accordingly not admissible to the Appellant. The impugned order is modified to the extent of remanding the matter relating to redetermination of cash refund applying the correct formula - Appeal allowed by way of remand.

Summary

Issues:
1. Calculation of refund amount under Rule 5 of CENVAT Credit Rules, 2004.
2. Denial of credit on 'segments and castings'.

Analysis:

Issue 1: Calculation of refund amount under Rule 5 of CENVAT Credit Rules, 2004
The appeals were filed against the order passed by the CCE (Appeals), GST & CE, Nasik, denying cash refund of accumulated CENVAT Credit on export of goods. The Appellant claimed refund of unutilized CENVAT Credit between January 2013 to March 2017. The dispute arose due to the methodology adopted in calculating the refund amount under Rule 5 of CENVAT Credit Rules, 2004. The Appellant argued for uniformity in adopting the value, either FOB value or CIF value, in both the numerator and denominator of the formula. The Tribunal had previously remanded the matter for reconsideration of the cash refund claim with correct formula application. The Adjudicating authority later sanctioned cash refund adopting the FOB value as export turnover. The Tribunal, in the present case, remanded the matter to recalculate the refund claim by adopting a uniform value in both numerator and denominator as per Rule 5 of CENVAT Credit Rules, 2004.

Issue 2: Denial of credit on 'segments and castings'
The Appellant's claim for cash refund on 'segments and castings' was rejected on the grounds that they were considered as capital goods, not covered under Rule 5 of CENVAT Credit Rules, 2004. The Appellant argued that even though the supplier classified them as capital goods, these items should be considered as inputs due to their limited lifespan and exhaustion after use in the manufacturing process. The Revenue contended that the segments are indeed capital goods used for grinding purposes, as per the Central Excise Tariff Act, 1985. The Tribunal held that despite the limited lifespan of the segments, they cannot be classified as inputs for manufacturing finished goods. Therefore, the denial of cash refund on the segments and castings was upheld under Rule 5 of CENVAT Credit Rules, 2004.

In conclusion, the Tribunal partly allowed the appeals, remanding the calculation of the refund claim with the correct formula application while upholding the denial of cash refund on 'segments and castings' classified as capital goods.