Refund of unutilised export credit under Rule 5 cannot be denied for failure to exhaust domestic clearances first.

Unutilised Cenvat credit attributable to exports cannot be denied refund under Rule 5 of the Central Excise Rules, 2004 merely because the assessee had domestic clearances or had not first exhausted the credit against such clearances. The Tribunal noted that Circular No. 120/01/2010-ST supports refund where export-related credit remains unutilised, and accepted that Rule 5 does not require a strict one-to-one correlation between input credit and exported goods. On that basis, the refund claim was held allowable and the contrary rejection was found unsustainable.

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Issues: Whether refund of accumulated Cenvat credit under Rule 5 of the Central Excise Rules, 2004 could be denied to a 100% export-oriented unit on the ground that the credit ought to have been utilised for domestic clearances first.

Analysis: The refund claim arose from unutilised Cenvat credit pertaining to the export period. The rejection by the lower authorities rested on the view that the appellant should have adjusted the credit against duty on domestic clearances. The clarification in Circular No. 120/01/2010-ST dated 19.01.2010 supported refund of credit where exports were made and the credit could not be utilised, and the Tribunal also relied on the principle that Rule 5 does not require a one-to-one correlation between input credit and exported goods. The rejection was therefore inconsistent with the settled approach to refund of unutilised credit in export situations.

Conclusion: The refund claim was allowable and the denial of refund was unsustainable; the order was set aside in favour of the assessee.

Ratio Decidendi: Unutilised Cenvat credit attributable to exports cannot be denied refund under Rule 5 of the Central Excise Rules, 2004 merely because the assessee had domestic clearances or had not first exhausted the credit for such clearances, and no strict one-to-one correlation is required.

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