2022 (9) TMI 736 - AT - Central Excise

Refund of Cenvat credit - denial of refund on the ground that since the goods were exported without payment of duty but not under the bond or the letter of undertaking, that appellant was denied to claim the benefit of Rule 6(1) of Cenvat Credit Rules, 2004 - Denial also on the ground that claim of refund pertains to the period from 30.10.2014 to 29.10.2015 during which the appellant was not having any central excise registration - Rule 6(1) of Cenvat Credit Rules, 2004 - HELD THAT - As per Rule 6 (1) of CCR, 2004 no Cenvat credit will be available in respect of inputs used in manufacture of exempted products. Though Rule 6 (6) (v) creates an exemption inter alia in respect of excisable goods removed without payment of duty for export but only for those exports as were made under bond in terms of Central Excise Rules, 2002. The export in the present case has not been made under bond - Sub-rule 6 also though relied upon by the appellant as an exception, but as already observed the said exception is applicable though in case of excisable goods removed without payment of duty but only when they are cleared for export under bonds in terms of provisions of Central Excise Rule, 2002. Hence the exception as prayed for are found not available to the appellant. The appellant was not entitled to claim the Cenvat credit of duty paid on imports used in manufacture of the product to which nil rate of duty was applicable. In such situation if some credit has been availed Rule 14 should have first been applied by the department - In the present case, it is not coming apparent as to whether said rule 14 has been complied with by the department prior rejecting the impugned refund. Matter remanded back to the original Adjudicating Authority to check for the compliance of Rule 14 CCR, 2004 and then to freshly adjudicate the impugned refund - appeal allowed by way of remand.

Summary

Issues:
- Denial of refund of Cenvat credit due to lack of bond or letter of undertaking for exported goods
- Alleged violation of Rule 9(2) and Rule 11(2) of Central Excise Rules
- Applicability of Rule 6 of Cenvat Credit Rules, 2004

Analysis:

Issue 1: Denial of refund of Cenvat credit due to lack of bond or letter of undertaking for exported goods
The appellant, a manufacturer of non-excisable goods, applied for a refund of Cenvat credit amounting to Rs.12,14,299 under Rule 5 of Cenvat Credit Rules, 2004. The claim was rejected on the grounds that the goods were exported without payment of duty but not under bond or letter of undertaking, thus denying the benefit of Rule 6(1) of the Rules. The Tribunal observed that the appellant's final product attracted nil rate of duty, making the requirement of bond or letter of undertaking unnecessary. The Tribunal referred to relevant notifications and rules to explain that goods subject to nil rate of duty are not eligible for Cenvat credit on inputs used in the export of exempted goods. The Tribunal concluded that the appellant was not entitled to claim the Cenvat credit, and the matter was remanded back to the original Adjudicating Authority for further examination.

Issue 2: Alleged violation of Rule 9(2) and Rule 11(2) of Central Excise Rules
The rejection of the refund claim was also based on the alleged lack of particulars required under Rule 9(2) of Cenvat Credit Rules in the invoices issued by one of the appellant's suppliers. The Tribunal noted that the rejection on this ground was unjustified, as the documents provided by the appellant contained all necessary particulars as per the rule. Therefore, the rejection on the basis of lack of documents, specifically invoices, was deemed highly unjustified.

Issue 3: Applicability of Rule 6 of Cenvat Credit Rules, 2004
The Tribunal analyzed Rule 6 of the Cenvat Credit Rules, which deals with the allowance of Cenvat credit to a manufacturer of final products. It was highlighted that the rule prohibits Cenvat credit on inputs used in the manufacture of exempted goods. The Tribunal explained the options available to manufacturers dealing with both dutiable and exempted products, emphasizing the requirement to maintain separate inventory or pay a specified amount if separate inventory is not feasible. The Tribunal also clarified that the exception under Rule 6(6)(v) for excisable goods removed without payment of duty for export applies only when exports are made under bond in terms of Central Excise Rules, which was not the case for the appellant.

In conclusion, the Tribunal allowed the appeal by remanding the matter back for further examination to ensure compliance with Rule 14 of the Cenvat Credit Rules, 2004 before rejecting the refund claim.