CENVAT refund and pre-deposit relief turned on whether export credit needed one-to-one input correlation.

Refund of CENVAT credit under Rule 5 and Notification No. 11/2002-C.E. (N.T.) was examined on the question whether Condition No. 5 required one-to-one correlation between inputs and exported final products. The assessee relied on the view that accumulated, unutilised credit remaining at the end of the relevant quarter was refundable, and the department did not distinguish the CENVAT provision from the earlier Modvat position. On a prima facie reading, the refunds appeared to have been made in accordance with the notification condition, and a strong prima facie case was found for waiver of pre-deposit and stay of recovery of the duty demand and penalty.

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Issues: Whether the assessee had made out a prima facie case for waiver of pre-deposit and stay of recovery in a dispute concerning refund of CENVAT credit under Rule 5 of the CENVAT Credit Rules, 2001 and Notification No. 11/2002-C.E. (N.T.).

Analysis: The assessee's contention was that Condition No. 5 of the notification did not require one-to-one correlation between inputs and exported final products, and that accumulated credit not utilised within the relevant quarter remained refundable. Reference was made to the earlier view that accumulated Modvat credit could be refunded where it was not utilised within the relevant period. The departmental view did not show any distinction between the cited CENVAT provision and the earlier Modvat provision. On a prima facie reading, the refunds appeared to have been made in terms of the relevant notification condition.

Conclusion: The assessee was held to have made out a strong prima facie case for waiver of pre-deposit and stay of recovery of the duty demand and penalty.

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