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Issues: (i) Whether refund of unutilised Cenvat credit under Rule 5 of the Cenvat Credit Rules, 2002 could be restricted by applying Standard Input Output Norms fixed by the DGFT. (ii) Whether an amount allegedly relatable to duty on scrap generated during manufacture could be deducted from the refund claim in the absence of any quantified or confirmed demand.
Issue (i): Whether refund of unutilised Cenvat credit under Rule 5 of the Cenvat Credit Rules, 2002 could be restricted by applying Standard Input Output Norms fixed by the DGFT.
Analysis: Rule 5 contemplates refund of accumulated credit remaining unutilised because the final products are exported, provided the prescribed procedure is followed. The provision does not provide for curtailment of refund on the basis of input-output norms fixed for a different scheme or context. The norms relied upon by the lower authorities were held to be irrelevant for determining refund of unutilised credit arising from exports.
Conclusion: The refund could not be restricted by applying DGFT Standard Input Output Norms.
Issue (ii): Whether an amount allegedly relatable to duty on scrap generated during manufacture could be deducted from the refund claim in the absence of any quantified or confirmed demand.
Analysis: There was nothing on record to show that duty on the scrap had been quantified or confirmed by any demand. In the absence of an enforceable demand, deduction of such amount from the refund claim was not permissible. Any demand in respect of scrap was left open to be initiated in accordance with law, but it could not be set off against the refund claim without adjudication.
Conclusion: The amount attributable to scrap could not be deducted from the refund claim.
Final Conclusion: The impugned order was unsustainable and the appeals succeeded with consequential relief.
Ratio Decidendi: Rule 5 refund of unutilised Cenvat credit for exports cannot be curtailed by external input-output norms, and no deduction from such refund can be made on account of alleged liability unless the duty demand has been quantified and confirmed in law.
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