2022 (5) TMI 1394 - AT - Central Excise

100% EOU - refund of cenvat credit accumulated - export of goods under a bond or a letter of undertaking - quantum of waste generated/determined as per input output norms - denial of refund on the ground that waste generated is more than the prescribed norms - Rule 5 of Cenvat Credit Rules - HELD THAT - The order of the lower authority has denied the refund stating that the waste generated is more than the prescribed norms. The above ground cannot be a reason for denial of refund of such accumulated credit. If excess waste was generated, the same has also been cleared in DTA on payment of duty due on such waste. This automatically will take care of such accumulated credit. Hence we find that excess waste generated cannot be a norm for denial of such credit. There are no merits in the impugned order. Even the appeal filed by Revenue is not sustainable for this reason only. Reliance can be placed in the case of M/S ASIL INDUSTRIES LTD VERSUS CCE, JAIPUR I 2015 (2) TMI 747 - CESTAT NEW DELHI where it was held that The appellant would be eligible for cash refund of the accumulated Cenvat credit taken in respect of inputs which have been used in the manufacture of goods which has been exported under bond/LUT and in this case, cash refund can be disallowed only to the extent the cenvated inputs are contained in the scrap cleared for home consumption on payment of duty. The appeals filed by the appellantassessee are allowed and the appeals filed by the Revenue are dismissed.

Summary

Issues:
Refund claim under Rule 5 of Cenvat Credit Rules, 2004.

Analysis:
The appellant-assessee, a 100% EOU engaged in manufacturing engineering goods for export, filed refund claims under Rule 5 of Cenvat Credit Rules for the cenvat accumulated on goods exported. The appellant cleared waste and scrap generated during manufacturing in DTA on duty payment. The refund claims were initially modified by the Deputy Commissioner/Assistant Commissioner based on scrap generation ratios. The Commissioner (Appeals) later allowed the refund based on approved input-output norms from the date of application filing before the Development Commissioner. The Revenue contended that the benefit date should align with specific notifications. The appellant argued that Rule 5 does not limit refunds based on waste generation, emphasizing the inability to utilize accumulated credit due to full export production. The Tribunal noted Rule 5 conditions and held that excess waste generation should not deny credit refund, citing relevant case laws.

The Tribunal analyzed Rule 5 of Cenvat Credit Rules and Notification No. 05/2006, emphasizing two conditions: the appellant's accumulated credit due to goods exported under bond or letter of undertaking and the inability to utilize such credit. The lower authority's denial of refund based on excess waste generation was deemed unjustified, as the clearance of waste in DTA covered the duty payment on excess waste. The Tribunal dismissed Revenue's appeal, citing precedents like Kochar Sung-Up Acrylic Ltd., Philco Exports Ltd., and ASIL Industries Ltd., which emphasized the admissibility of refunds for inputs used in export goods manufacturing, regardless of waste generation or input-output norms. The Tribunal allowed the appellant-assessee's appeals and dismissed Revenue's appeals accordingly.