Refund of accumulated Cenvat credit under export under bond cannot be denied for not exporting on payment of duty.

Accumulated Cenvat credit under Rule 5 of the Cenvat Credit Rules, 2002 cannot be denied merely because the exporter did not choose to export goods on payment of duty by utilising the credit balance. Refund is available where inputs are used in final products cleared for export under bond or letter of undertaking, and the credit cannot be adjusted against duty on home clearances or export on payment of duty. The proviso limits refund only where drawback or rebate has been availed. As the goods were exported under bond and no drawback or rebate was claimed, the contrary view was unsustainable and refund was due.

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Issues: Whether refund of accumulated Cenvat credit under Rule 5 of the Cenvat Credit Rules, 2002 could be denied on the ground that the assessee ought to have exported the goods on payment of duty by utilising the credit balance.

Analysis: Rule 5 permits refund where inputs are used in the manufacture of final products cleared for export under bond or letter of undertaking and the accumulated credit cannot be adjusted against duty payable on clearances for home consumption or export on payment of duty. The proviso restricts refund only where drawback or rebate of duty has been availed. Since the goods were exported under bond, no drawback or rebate was claimed, and the credit could not be adjusted against other clearances, the condition in the notification could not be read to require a preference for export on payment of duty. The contrary view taken in the impugned order was held to be unsustainable.

Conclusion: The denial of refund was not justified and the assessee was entitled to refund of the accumulated Cenvat credit.

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