2013 (12) TMI 583 - AT - Central Excise

Tribunal remands case for fresh decision, stresses input-output verification & Rule 5 adherence. Refund claim not time-barred.

CCE, Jalandhar Versus M/s. JCT Ltd.

CCE, Jalandhar Versus M/s. JCT Ltd. - 2013 (296) E.L.T. 426 (Tri. - Del.) Issues Involved:1. Applicability of Rule 5 of the Cenvat Credit Rules for cash refund of accumulated credit.2. Limitation period for filing the refund claim.3. Eligibility of cenvat credit on inputs used in manufacturing fully exempted goods exported out of India.4. Verification of input-output correlation for refund eligibility.Detailed Analysis:1. Applicability of Rule 5 of the Cenvat Credit Rules for Cash Refund of Accumulated Credit:The main contention revolves around whether Rule 5 of the Cenvat Credit Rules applies to cases where the exported goods are fully exempt from duty. The Revenue argued that Rule 5 is only applicable to dutiable goods, while the respondent contended that the rule allows for cash refund of cenvat credit for inputs used in the manufacture of final products cleared for export under bond, regardless of whether the final product is dutiable or exempt. The Tribunal noted that Rule 5 provides for cash refund of accumulated cenvat credit taken only in respect of those inputs used in the manufacture of final products cleared for export under bond or letter of undertaking. Thus, the principle of one-to-one correlation between input and finished product is essential for cash refund under Rule 5.2. Limitation Period for Filing the Refund Claim:The Revenue contended that the refund claim for the period April 2002 to June 2002 was time-barred as it was filed after one year from the date of export. The Tribunal, however, observed that the notification under Rule 5 of the Cenvat Credit Rules does not specify the date from which the limitation period is to be counted. The Tribunal referred to previous judgments, including those from the Hon'ble Madhya Pradesh High Court and the Tribunal itself, which held that the limitation period prescribed under Section 11B is not applicable to cash refund claims of accumulated cenvat credit. Therefore, the claim for the period April 2002 to June 2002 was not considered time-barred.3. Eligibility of Cenvat Credit on Inputs Used in Manufacturing Fully Exempted Goods Exported Out of India:The Tribunal referenced judgments from the Hon'ble Bombay High Court and the Hon'ble Himachal Pradesh High Court, which held that cenvat credit is admissible for inputs used in the manufacture of excisable goods, even if the finished goods are fully exempt from duty but are exported out of India. Therefore, if the accumulated credit due to export cannot be utilized for domestic clearance, its cash refund should be allowed. This interpretation supports the respondent's claim for cash refund of accumulated credit even if the final exported product is exempt from duty.4. Verification of Input-Output Correlation for Refund Eligibility:The Revenue argued that the accumulated AED (T&TA) credit was primarily taken on duty-paid manmade yarn and fibers used in manufacturing manmade fabrics cleared for home consumption, while the exported goods were unprocessed cotton fabrics. The Tribunal emphasized the need for verification to ensure that the accumulated credit for which cash refund is sought pertains to inputs used in the manufacture of exported final products. The Tribunal remanded the case to the original adjudicating authority for de novo decision, instructing them to verify if the accumulated cenvat credit is indeed in respect of inputs used in the manufacture of final products exported under bond/LUT.Conclusion:The Tribunal set aside the impugned order and remanded the matter for a fresh decision, emphasizing the need for verification of input-output correlation and adherence to the principles laid out in Rule 5 of the Cenvat Credit Rules. The Tribunal also clarified that the refund claim for the period April 2002 to June 2002 is not time-barred.