2015 (9) TMI 1142 - AT - Central Excise

Appellate court grants refund of Cenvat Credit, emphasizing no restriction on utilizing unutilized credit for DTA clearances.

Skaps Industries Pvt. Ltd. Versus C.C.E. - Ahmedabad-ii

The appellate court allowed the appellant's appeal for the refund of Cenvat Credit, overturning the decision of the first appellate authority. The court ... 100% EOU - Denial of refund claim - Refund of unutilized CENVAT Credit - DTA Clearances of waste and scrap - Held that:- Refund claim of ₹ 10,02,301 filed by the appellant under Rule-5 of CCR was sanctioned by the Adjudicating Authority under OIO Dated 26/05/2008. However, on departmental review the same was set aside by the first appellate authority against which the present appeal is filed. The only grounds taken by the first appellate authority is that unutilized credit could have been utilized for DTA clearances being made by the appellant. However, there is no such restriction under Rule-5 of CCR and he refund notification issued there under .It is apparent from the case records that certain waste/rejects of the Yarn and Fabrics are only cleared in DTA which cannot be exported. If the stand of the department is accepted then no refund will be admissible to an exporter because every manufacture will result into generation of some waste and scrap which has to be cleared in DTA - Decided in favour of assessee. Issues: Refund of Cenvat Credit under Rule-5 of CCRThe appellant filed appeals regarding the Commissioner(Appeal) allowing the Revenue's appeal against the refund of &8377; 10,02,301 sanctioned by the Adjudicating Authority. The appellant, a 100% EOU, argued that export of finished goods accumulated in the Cenvat Account is refundable under Rule-5 of the Cenvat Credit Rule 2004. The appellant contended that certain DTA clearances shown in returns should not impact the refund claim. The Revenue defended the appellate authority's decision.Upon hearing both sides and reviewing the case records, it was noted that the refund claim was initially sanctioned by the Adjudicating Authority but set aside by the first appellate authority based on the possibility of utilizing unutilized credit for DTA clearances. However, it was highlighted that there is no such restriction under Rule-5 of CCR and the refund notification. The records indicated that only waste/rejects of Yarn and Fabrics were cleared in DTA, which cannot be exported. Rejecting the department's stand, the judgment allowed the appeal by the appellant, emphasizing that if the department's stance was accepted, no refund would be admissible to exporters due to the generation of waste and scrap in manufacturing processes. Consequential relief was granted to the appellant.