Whether refund of cenvat credit allowed if the assessee is unable to utilize the same?

PJ/Case Laws/2010-11/1116

Prepared By:
Rajani Thanvi(ACA),
Bharat Rathore(BCom),
Parag Ghate(BCom),

Case: Fine Care Bio-Systems Vs Commissioner of C.Ex., Ahmedabad

Citation: 2010 (20) S.T.R 193 (Tri. Ahmd)

Issue:

Whether refund of cenvat credit allowed if the assessee is unable to utilize the same?

Brief Facts:

The appellant is a 100% EOU engaged in manufacture of laboratory equipments, parts and accessories falling under Chapter 90 of the schedule to the Central Excise Tariff Act, 1985. The appellant purchased their raw materials and inputs from the domestic market on payment of appropriate duty and have taken Cenvat Credit of the duty paid on such raw materials and inputs under Cenvat Credit Rules, 2044. As the entire production is exported to all over the world and in the circumstances when the appellant have no clearance in the Domestic Tariff Area, the appellant have no opportunity of utilizing the Cenvat credit earned in any manner. In such circumstances, Rule 5 of the Cenvat Credit Rules, 2004 allows refund of Cenvat. The appellant applied for the refund of Cenvat Credit earned as they did not have any possibility of utilising the said credit in the near future.
The Deputy Commissioner of Central Excise after scrutiny of the said claims issued show cause notice asking the appellant as to why the refund claims should not be rejected under Rule 5 of the Cenvat Credit Rules, 2004 read with Section 11B of the Central Excise act, 1944. The adjudicating authority rejected the said refund claims of the appellant.
The Original Adjudicating Authority decided the matter afresh and issued present impugned orders. In adjudicating afresh lower adjudicating authority again rejected the entire refund claim on the ground that during the month of May 2006 and June 2006. Therefore, appellant is not eligible for the refund of Cenvat Credit under Rule 5 ibid. In respect of refund claims, were sanctioned except for the input credit pertains to the Custom House Agent’s Service and Air Freight Services.

Reasoning:

Hearing both sides, regarding refund claims relating to May 2006 and June 2006, the refund claims have been rejected on the ground that appellants should have applied for the accumulated credit in the months in which export is made. They also observed that if there is no export how it can be said that adjustment was not possible. Cestat found that issue has come up before the Tribunal and placed reliance on case of Philco Export v. CCE, New Delhi. Further, Rule 5 of Cenvat Credit Rules provides for refund only when the accumulated credit cannot be used. This itself shows that there cannot be any restriction for making the refund claim and availability or availment of input credit.
The Commissioner has allowed the benefit of service tax paid on Customs House Agent Service on the ground that the Tribunal decisions and the Board’s circular support the view that where the goods exported and the sale is on FOB/CIF basis, the place of removal has to be load port only. However Cestat rejected the claim for benefit of refund of service tax with regard to Air Freight service on the ground that it is clear that said service for transportation by air to the destination country and therefore it is beyond the place of removal which is port or airport in the case of export. In fact from the submissions of the appellant before him reproduced by Them, “for the export of goods”, the appellants are availing the service of different freight companies that take up the goods from the factory, transport them to the airport and make all the documentation for the transportation by air to the destined country. The companies giving these service charges for their services and pay service tax on it. The conclusion that the commissioner had reached does not emerge from the submissions at all. The appellant submission shows that the activities from which service tax liability was incurred related to the services provided till the goods were loaded on to the air craft for export and not thereafter. Therefore the principle applied by the Commissioner with regard to Customs House Agent Service would apply for freight services also.

Judgment:

Appeal was allowed.

Comment:

The ratio of this case can be applicable on the cases where the assessees are unable to utilize the cenvat credit; they can have the benefit of Rule 5 of Cenvat Credit Rules, 2004 by way of refund of cenvat credit unutilized.

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PJ/Case Laws/2010-11/1116

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