Refund of unutilised Cenvat Credit under Rule 5 of CCR, 2004

PJ/Case Law/2011-12/1137

Case: Commissioner of C. Ex., Belapur v/s Ambica International Pvt Ltd

Citation: 2011 (266) ELT 262 (Tri-Mumbai)

Issue: - Refund of unutilised Cenvat credit under Rule 5 – No condition in the Rule or Notification No. 5/2006-CE(NT) to establish input/output correlation.

Brief Facts: -Respondents were engaged in the manufacture of copier paper falling under heading 48025610 and were exporting almost 100% of the finished goods. The cenvat credit availed by them remained unutilised. They were only utilizing the credit against clearance of trimmings and waste & scrap emerging during the manufacturing process. Therefore, they filed claim under Rule 5 of CCR, 2004 readwith Notification No. 5/2006-CE(NT) dated 14.03.2006 for refund of unutilised amount of cenvat credit taken on inputs.

The Adjudicating Authority granted quarterly refund for the periods from December, 2006 to September, 2007. Claims prior to November, 2006 were rejected. Against the grant of refund, Revenue filed appeal before the Commissioner (Appeal) which was rejected. Hence Revenue is before the Tribunal.

Appellant’s Contention: - Revenue raised the contention that the Lower Authorities have not determined the case as per the Condition No. 4 of the Notification No. 5/2006-CE(NT) which provides that “the refund is allowed only in those circumstances where a manufacture or provider of output service is not in a position to utilize the input credit or input service credit allowed under Rule 3 of CCR, 2004 against goods exported during the quarter/month to which the claim relates.”

It is contended that there was no finding that correlation of input/output was carried out and in the absence of the correlation, the Cenvat credit involved in the manufacture of exported goods, cannot be allowed.

Reasoning of Judgment: - The Tribunal held that Respondents were exporting their total production barring trimmings of paper and some waste and scrap. It showed that they were not able to utilize the credit on inputs used in the manufacture of final products for export. The Tribunal further held that in the order of the Adjudicating Authority it was clearly mentioned that the refund was allowed on quarterly basis. And for the quarters which were time barred as per provisions of Section 11B, refund claim was rejected.

It was further held that there is no condition to establish input/output correlation in Rule 5 or in Notification issued thereunder. No infirmity in impugned order granting refund and therefore, is upheld.

Decision:- Appeal dismissed.

Comment:- This is a very good decision. The department authorities normally insist on the input output ratio for sanction of refund of unutilized credit under Rule 5 of CCR, 2002.

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PJ/Case Law/2011-12/1137

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