Refund of unutilised cenvat credit - requirement of one-to-one corelation bet inputs & export goods

PJ/Case Laws/2012-13/1044

Case: COMMR. OF C. EX., BANGALORE-III V/s MOTHERSON SUMI ELECTRIC WIRES

Citation: 2012 (278) E.L.T. 177 (Kar.)

Issue:- Refund of Unutilised Cenvat credit on inputs under Rule 5 of Cenvat Credit Rules, 2004 – whether it is not necessary to prove one-to-one correlation between inputs and exported goods?

Brief Facts: - Assessees are manufactures of PVC Insulated wires. They availed credit on the input received and claimed that they have utilized it in the manufacture of PVC Insulated Wires which are cleared for export. They filed five refund claims for the period from April, 2005 to August, 2006. The Original Authority rejected the refund claims on the ground that the assessees had not fulfilled the conditions of Rule 5 of Cenvat Credit Rules, 2002, read with Notification No. 11/2002-C.E. (N.T.), as amended.

In appeal, the Commissioner (Appeals) allowed the appeals and held that the assessees were not in a position to utilize the credit availed on inputs used in the manufacture of goods which were exported under bond, which is getting accumulated from time to time. It is for the said reasons that Rule 5 of the Cenvat Credit Rules, 2004 provides for sanction of refund in cash in respect of goods exported under bond/letter of undertaking. In the present case, the assessees have fulfilled all the conditions of Rule 5 of the Cenvat Credit Rules read with Notification No. 11/2002-C.E., dated 1-3-2002 as amended. He also held that it is not necessary for the assessees to prove that duty paid on input is used in the manufacture of the very product for which it was exported and thus he set aside the order of the assessing authority and granted the benefit.

Aggrieved by the same, the Revenue preferred an appeal. The Tribunal on consideration of the relevant provisions of the law, the judgments on the point held that it is not in dispute that the assessees used the inputs and have exported the impugned goods and the refund is only in respect of input credit attributable to the inputs utilized in the exported goods. It is not necessary to prove one-to-one correlation of inputs with that of exported goods. The assessees were not in a position to utilize the credit availed on inputs used in the manufacture of goods which were exported under bond and which were getting accumulated from time to time. In those circumstances, when once the appellate authority correctly applied Rule 5 and granted the refund, therefore they declined to interfere with the wall considered order passed by the appellate authority. Against the said order the present appeal is filed.

This appeal was preferred by Revenue against order of the Tribunal upholding the order of the appellate authority allowing refund of Cenvat credit in terms of Rule 5 of Cenvat Credit Rules, read with Notification 11/2002.

Respondent’s Contention: - Respondents submitted that they have fulfilled all the conditions of Rule 5 of the Cenvat Credit Rules read with Notification No. 11/2002-C.E., dated 1-3-2002 as amended. He also held that it is not necessary for the assessees to prove that duty paid on input is used in the manufacture of the very product for which it was exported and thus he set aside the order of the assessing authority and granted the benefit.

Reasoning of Judgment: -The High Court held that theduty paid inputs are used in the manufacture of finished products which are exported. It is also not in dispute that the assessees have complied with Rule 5 of the Cenvat Credit Rules, 2004. Therefore, they are in law entitled to refund of the unutilized Cenvat credit in their account. That is precisely what has been held by both the appellate authorities. No substantial question of law arises for consideration in these appeals. Accordingly, there is no merit in these appeals.

Decision: - Appeal dismissed.

Comment:- In this decision, it is clearly held that there is no one-to-one correlation is required between input and final product for claiming the refund of unutilized credit under Rule 5. But the department is not accepting the same and is rejecting the same on this ground only. But High court decision will settle this issue.

Even the current budget has brought amendment in the notification whereby the refund will be allowed on the basis of ration of export turnover to total turnover and no correlation is required. This is welcome step but the field formation should implement the spirit of the notification.

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PJ/Case Laws/2012-13/1044

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