Whether initially opting for rebate claim can be grounds for denying refund of unutilised credit under Rule 5?

PJ/Case Law/2013-14/1688

Case:- BOMBAY DYEING & MFG. CO. LTD. Versus COMMISSIONER OF C. EX., RAIGAD

Citation:- 2013 (290) E.L.T.490 (Tri-Mumbai)

Brief facts:-Material facts of this case are that The appellant M/s. Bombay Dyeing & Manufacturing Co. Ltd., Patalganga, filed refund claims of Rs. 3,03,64,498/-, 1,68,38,399/- and Rs. 1,01,97,308/- under Rule 5 of Cenvat Credit Rules, 2004 towards unutilized Cenvat credit availed on inputs used in the manufacture of final products which were exported, during the period April 2008 to June 2008. The claim was filed on the ground that they were not able to utilise such credit of duty paid on inputs used in the manufacture of goods exported during the said quarter under bond/LUT. The claim was examined by the jurisdictional Assistant Commissioner, who vide order dated 30-3-2009 sanctioned the refund claim. Aggrieved by the order, the Revenue preferred an appeal before the Commissioner (Appeals). The ld. Commissioner (Appeals) allowed the appeal filed by the Revenue. It is against the order in appeal that the assessee is in appeal before the Tribunal.

Appellant’s contention:- The appellant submitted that earlier the appellant had exported the goods under cover of ARE-2 without payment of duty and later on claimed and received rebate of duty element involved on the inputs consumed for manufacturing such exported goods. Subsequently, they discontinued exports under ARE-2 procedure and switched over to ARE-1 procedure. They also paid back the rebate received by them along with interest. Thereafter, they availed Cenvat credit equal to the rebate of duty paid back. Since they could not utilise the Cenvat credit, they sought refund of the same under Rule 5 of the Cenvat Credit Rules, 2004, which permits refund of unutilised Cenvat credit on quarterly basis.

They further contented that there is no bar on claiming alternate benefits if all the conditions are complied with. In other words, when a claim for rebate under Rule 18 has been foregone and the rebate received was paid back along with interest and later on they claimed refund of the Cenvat under Rule 5 of Cenvat Credit Rules, 2004, the benefit under the said Rule cannot be denied merely on the ground that they had initially claimed rebate of duty paid. Further, jurisdictional Additional Commissioner in his order dated 30-3-2009 had given a categorical finding that the appellant had complied with all the conditions subject to which refund under Rule 5 of Cenvat Credit Rules, 2004 was admissible. The order of the Appellate Authority that they did not avail Cenvat credit in respect of duty paid on inputs used in the manufacture of goods exported immediately on receipt of the inputs in the factory is not sustainable in law as there is no time-limit prescribed for availment of Cenvat credit under Cenvat Credit Rules, 2004.

Respondent’s contention:- It was contended by the respondent that accumulation of Cenvat credit is because the inputs had suffered a higher rate of duty than the rate of duty of the final products. The appellants were exporting only a smaller quantity of the total production, whereas the rest of the production was being cleared for home consumption. As per Notification No. 5/2006-C.E. (N.T.), dated 14-3-2006, refund should be granted only if the assessee were not in a position to utilize the credit, but this was not so in the case of the appellants.

The Assistant Commissioner erred in sanctioning the refund as it was also inadmissible in view of the CESTAT final order No. 1170/2007-SM(BR), dated 26-7-2007 in the case of M/s. J.V. Strips Ltd. v.CCE, Rohtak - 2007 (218)E.L.T.252 (Tri.-Del.) wherein CESTAT interpreted the phrase ‘immediately on receipt of the inputs’ as such convenient time as is reasonably requisite for doing the things. In the instant case, the delay in availing credit was caused by the assessee’s blatant intention to dodge the departmental action for recovery of the erroneous rebate received by them and to claim subsequently the said input stage credit under the Cenvat refund scheme, cannot be termed as ‘reasonable’ by any stretch of imagination; Though the appellants paid back the said input stage rebate along with interest, yet the fact remains that the rebate was erroneously sanctioned. The credit of the said amount taken by the respondents was not related to the duty paid on inputs but instead pertains to the said erroneous rebate of duty on inputs. The Notification No. 5/2006-C.E. (N.T.), dated 14-3-2006 provides for refund of the duty paid on inputs and not for the erroneous rebate of duty paid on inputs.

Reasoning of judgement:- In the instant case, initially the appellant had exported the goods under claim for rebate and later on they paid back the rebate taken along with interest. They also availed Cenvat credit for an equivalent amount in their Cenvat account. Thereafter, they applied for refund of accumulated Cenvat credit under Rule 5 of the Cenvat Credit Rules, 2004. The jurisdictional Assistant Commissioner after observing that they are unable to utilise the Cenvat credit during the relevant quarter in which the accumulation took place allowed them refund of the accumulated Cenvat credit in terms of Rule 5 of the Cenvat Credit Rules. According to tribunal there is no infirmity in the order passed by the original Adjudicating Authority with regard to sanction of refund claim of accumulated Cenvat credit in respect of goods exported under Rule 5 of the Cenvat Credit Rules, 2004. Thus, the appellant had made out a prima facie case against impugned order. Accordingly, the respected tribunal granted unconditional waiver of pre-deposit of Cenvat Credit refunded and stay recovery thereof during the pendency of these appeals.

Decision:-Stay application allowed.

Comment:-The gist of this case is that refund claim under Rule 5 for unutilised credit cannot be denied on the ground that initially the assessee opted for rebate claim for inputs and later on paid back the rebate claim erroneously claimed along with interest. The contention is not forceful as there is no time for availing cenvat credit and the phrase “immediately on receipt” merely denotes that cenvat credit may be taken anytime after receipt of inputs in the factory premises and does not means that the credit is required to be taken immediately.

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PJ/Case Law/2013-14/1688

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