Refund of Cenvat credit on exports - Nexus of inputs with final product exported

PJ/Case Laws/2011-12/1438

Case: COMMISSIONER OF C. EX., HYDERABAD Versus RAVI FOODS LTD.

Citation: 2011 (271) E.L.T. 436 (Tri. - Bang.)

Issue: Refund of Cenvat credit on exports - Nexus of inputs with final product exported - No requirement for correlation– question of restricting refund claim to the extent of input services used/consumed during month/quarter.

Brief Facts:-Respondent-assessee filed a refund claim for the quarter April, 2009 to June, 2009 under Rule 5 of Cenvat Credit Rules, 2004 read with Notification No. 5/2006-C.E. (N.T.), dt. 14-3-2006. The Adjudicating Authority restricted the refund to a lesser amount and did not allow the refund of balance amount on the ground that the assessee had not submitted documents and the proof of export.

In appeal, the Commissioner (Appeals) directed the Lower Authorities to grant the refund as the assessee had produced the relevant ARE-1 returns vide which the goods were exported.

Hence, Revenue, is in appeal before the Tribunal.

Appellant’s Contention:- Revenue contended that the Commissioner (Appeals) has erred in applying the provisions of Notification without considering the fact that the assessee had submitted photocopies of the shipping bills relating to CT-1 clearances along with refund claim and only given sworn-affidavit. It is his submission that the assessee had not submitted the shipping bill or Bill of Export duly certified by the Customs authorities. The goods were not exported.

It is submitted that the Commissioner (Appeals) has erred that there should not be any co-relation between inputs used and goods exported and hence question of restricting the refund to the extent of input services used/consumed during the month/quarter is erroneous. Eliance is placed on provisions of Rule 5 of CCR, 2004.

It was submitted that the Commissioner (Appeal) has placed reliance on the ratio of the decision of the Tribunal in the case of CCE v. Kanwal Engineers [1996 (87) E.L.T. 141 (Tri.)]. It is submitted that in this case, there was no proof of export which was submitted before the Department. It was submitted that only a sworn affidavit was given by merchant exporterthat goods under said ARE-1 returnes were exported and no other evidence is given. That such exports through merchant exporter were not eligible for refund as per Para 8.3 of the Board’s Supplementary Instructions. Therefore, this decision was not required to be followed.

Respondent’s Contention:- Respondent-assessee submitted that the exports were made through merchant exporters. That the said merchant exporters had executed a bond and after exports, original ARE-Is and shipping bills were retained by the merchant exporters to settle their bond account with the Department. Respondentsubmitted that the photocopies of the said ARE-1’s and other documentary evidences were produced before the Commissioner (Appeals). Reliance was placed on such documents and also on letter dated 5-2-2010 issued from the office of the CCE, Pune-III indicating that the ARE-is and shipping bill have been accepted as proof of export. It is submitted that as regards the refund, it was pertaining to the service tax credit availed by the appellant and not on inputs and the Commissioner (Appeals) has correctly followed the provisions of condition No. 5 of appendix to Notification No. 5/2006 which talks about refund of unutilised input service tax credit. It is submitted that the refund was correctly allowed based upon such an appendix.

Reasoning of Judgment:- The Tribunal noted that the issue regarding refund of credit for non-submission of proof of export by respondents was settled by Letter dated 05.02.2010 issued by CCE, Pune-III to the merchant exporter. This letter showed the acceptance of proof of export submitted by respondent pertaining to relevant period.

The Tribunal perused the letter and photocopies of ARE-1s produced before them and found that the amounts involved in the ARE-1s were denied to the assessee for non-production of ARE-1s. The Tribunal found that the Commissioner (Appeals) in his Order-in-Appeal has clearly recorded that the assessee has been taking a stand that ARE-1s had been submitted to the jurisdictional Central Excise authorities for squaring up the merchant exporter's bond account which is clearly evidenced from the above reproduced letter. The Tribunal found that having established the fact that the goods cleared from their factory premises under the relevant ARE-1s were exported and accepted by the Departmental Authorities at the merchant exporter's place, the Commissioner (Appeals)'s order to the extent of directing the Lower Authorities to grant the refund is correct.

As regards the refund of the cenvat credit on the input services, the Tribunal found that the plain reading of the provisions of Rule 5 of the CCR read with Notification No. 5/2006 makes it very clear that there is no requirement for co-relation between the inputs used and the goods exported. If that be so, the question of restricting the refund claim to the extent of input services used/consumed during the month/quarter seems to be mis-placed. At the same time, it is found that as per the condition No. 5 of the Notification No. 5/2006, the calculation which has been worked out by the Commissioner (Appeals) in the impugned order, if is correct, then the refund is liable to be sanctioned to the respondent/assessee. No infirmity found in the order of the Commissioner (Appeals) in this regard also.

In the end it was held that the impugned order recorded by the Commissioner (Appeals) is correct.

Decision:- Appeal rejected.

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PJ/Case Laws/2011-12/1438

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