2014 (3) TMI 124 - AT - Central Excise

Manufacturers granted refund claim for exempted goods export, citing Rule 5 precedent

The Tribunal allowed the appellant's appeal, granting a refund claim under Notification 5/2006 despite being manufacturers of exempted goods and not ... Refund of unutilized cenvat credit - export of goods - Notification no. 5/2006 - manufacturers of exempted goods - goods were not exported under bond - applicability of provisions of Rule 6(6)(v) of CENVAT Credit Rules, 2004 - Held that:- The issue came up before the Hon'ble High Court of Bombay in Repro India Ltd. (2007 (12) TMI 209 - BOMBAY HIGH COURT) wherein the Hon'ble High Court held that CENVAT credit used in the manufacture of final product being exported irrespective of the fact that final product are otherwise exempted by provisions of Rule 6(6)(v) of the CENVAT Credit Rules, 2004 are applicable. In the case of Salzer Controls Ltd. [2000 (12) TMI 870 - CEGAT, CHENNAI] and Paras Ship Breakers Ltd. [2003 (5) TMI 377 - CEGAT, NEW DELHI] this Tribunal has held that non-execution of bonds are only technical lapse. Further, in the case of Well Known Polyester Ltd. (2011 (1) TMI 664 - CESTAT, AHMEDABAD) wherein the exempted goods were exported without bond or LUT by an assesee who was not even registered without bond or LUT by an assessee who was not even registered with the Central Excise department. This tribunal has held that execution of bond/LUT was only procedural lapse for which refund could not be denied. In this case, appellant has not executed any bond for export of the goods. If the goods are exempted, execution of bond was not required. - appellant are entitled for refund claim - Decided in favor of assessee. Issues:1. Denial of refund claim under Notification 5/2006 due to manufacturing exempted goods and non-execution of bond for export.2. Interpretation of Rule 6(1) and Rule 6(6)(v) of CENVAT Credit Rules, 2004.3. Eligibility of input credit for exempted goods exported without bond.4. Applicability of Rule 5 of CENVAT Credit Rules, 2004 for claiming refund.Analysis:1. The appellants appealed against the denial of refund claim under Notification 5/2006 because they were manufacturers of exempted goods and did not export under bond. The consultant argued that they paid duty on inputs for manufacturing export goods, citing precedents where refund of CENVAT credit was allowed for inputs used in exempted goods exported under Rule 5. The department contended that as per Rule 6(1) of CENVAT Credit Rules, 2004, no credit is allowed for inputs in exempted goods. The Tribunal noted the intent to avoid exporting domestic duties and allowed the refund to maintain competitiveness in the international market.2. The Tribunal referred to the case of Drish Shoes Ltd. where the High Court held that CENVAT credit on inputs for exempted goods exported without bond is eligible for refund under Rule 6(6) of CENVAT Credit Rules, 2004. The High Court clarified that the term 'excisable goods' includes both dutiable and exempted goods, allowing credit for inputs of nil duty goods exported. This interpretation aligned with the Bombay High Court decision in Repro India Ltd., emphasizing that CENVAT credit for exported final products, even if exempted, is applicable.3. Precedents like Salzer Controls Ltd. and Paras Ship Breakers Ltd. established that non-execution of bonds for export is a technical lapse, not a ground for denying refund. The Tribunal emphasized that the execution of a bond for export of exempted goods is not mandatory. Relying on Well Known Polyester Ltd., the Tribunal concluded that procedural lapses like non-execution of bonds should not hinder refund claims for exported exempted goods.4. Considering the above precedents and the specific circumstances of the case where the appellant did not execute any bond for export of exempted goods, the Tribunal held that the appellant was entitled to the refund claim. The appeals were allowed, granting consequential relief to the appellants.