Cenvat re-credit on cancelled rebate claim allowed; penalty unsustainable absent any statutory prohibition.

An export-oriented unit was found entitled to restore Cenvat credit after its rebate claim on duty-paid exported goods was cancelled, because Rule 5 of the Cenvat Credit Rules, 2004 did not create any statutory bar and Notification No. 5/2006-CE (N.T.) recognised refund entitlement in such circumstances. The amount earlier debited was treated as credit lawfully available for re-credit once the rebate claim stood cancelled. On that basis, the penalty was held unsustainable in the absence of a prohibiting provision.

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Issues: Whether an export-oriented unit was entitled to take re-credit in its Cenvat account after cancellation of the rebate claim for duty paid on exported goods, and whether the penalty imposed was sustainable.

Analysis: The Tribunal followed its earlier decision in the assessee's own case and held that there was no statutory bar on an export-oriented unit availing Cenvat credit on inputs used in exported goods or taking re-credit when the rebate claim had been cancelled. It was noted that Rule 5 of the Cenvat Credit Rules, 2004 did not prohibit such relief and that Notification No. 5/2006-CE (N.T.) dated 14.03.2006 recognised refund entitlement in such situations. Once the rebate claim stood cancelled, the amount already debited was treated as credit lawfully available for restoration in the Cenvat account.

Conclusion: The assessee was entitled to re-credit of the amount in its Cenvat account, and the penalty was not sustainable.

Ratio Decidendi: Where duty-paid inputs used in exported goods are eligible for refund or rebate treatment, cancellation of the rebate claim entitles the assessee to restore the corresponding Cenvat credit, and penalty cannot be sustained in the absence of a statutory prohibition.

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