2020 (2) TMI 625 - AT - Central Excise

Refund of CENVAT Credit - denial on the ground that the same could have been adjusted against payment of tax on inputs and Cenvat Credit account was not debited at the time of making the claim - period January, 2012 to March, 2012 - HELD THAT - The assessee had cleared goods for export under LUT as well as on payment of duty and therefore, there was opportunity on the part of the assesse to utilise accumulated credit for export of goods on payment of duty. Appellant had not denied the same but its only contention was that even after payment of all duties, it had accumulated Cenvat credit because of high rate of duty in the input and low rate duty in the output, which is required to be refunded. Going by Rule 5 of Cenvat Credit rule, it is manifestly cleared that refund is admissible where for any reason such adjustment is not possible. In the instance case, adjustment of 12% duty on inputs can never be made possible against 6% on output to bring the difference to zero level. Therefore the Learned Commissioner (Appeals) should have refunded the balance amount which was available to the claimant as further adjustment was not possible. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Denial of refund of Cenvat Credit on the ground of non-debiting in Cenvat Credit account at the time of claim.

Analysis:
The appellant, a manufacturer of medicaments, sought a refund of &8377; 5,25,757 under Rule 5 of CCR due to the accumulation of input credits resulting from a variation in input and output duty rates. The claim was rejected by the adjudicating authority and Commissioner (Appeals) citing non-debiting of the Cenvat Credit account at the time of filing the refund claim. The appellant argued that the accumulation was due to the duty rate disparity and committed to debiting the account post-refund sanction. Reference was made to judicial decisions emphasizing the beneficial nature of Rule 5 of Cenvat Credit Rule, 2004. The appellant contended that failure to debit the account at the time of claim should not bar the refund claim.

During the appeal, the Learned Authorised Representative for the respondent supported the rejection, highlighting that the appellant had also exported finished goods on duty payment during the period, indicating utilization of Cenvat Credit. The Range Superintendent's calculation sheet and export details were examined, showing opportunities for credit utilization for exports. However, the appellant's contention of accumulating credit due to duty rate differences was acknowledged. Rule 5 allows refunds where adjustment is not feasible, as in this case where the 12% input duty couldn't be offset against the 6% output duty. The Commissioner (Appeals) was expected to refund the excess amount as further adjustment was impossible.

The Tribunal observed that the rejection based on non-debiting in the Cenvat ledger was unfounded, citing precedents from IDOL TEXTILES LTD and SANDOZ PVT LTD cases. The order was set aside, allowing the appeal and directing the refund of &8377; 5,25,757 under Rule 5 of Cenvat Credit Rules, 2004, with applicable interest. The respondent department was instructed to make the payment within three months of the order receipt.