Unutilized cenvat credit refund for a 100% EOU upheld; one-to-one correlation with exports was not required.

Refund of unutilized cenvat credit to a 100% Export Oriented Unit was upheld where the records, ER-2 returns and departmental verification showed the credit could not have been used in the ordinary course and the refund was already restricted for input services not used in manufacture. The applicable circular and Notification No. 5/2006-CE(NT) were read to mean that one-to-one correlation between inputs and exported goods was not required. The Revenue did not dislodge those factual and legal findings, so the refund remained sanctioned and the appeals were rejected.

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Issues: Whether the Revenue was justified in challenging the refund of unutilized cenvat credit claimed by a 100% Export Oriented Unit in respect of inputs used for manufacture of exported goods, and whether one-to-one correlation between inputs and exports was required.

Analysis: The refund claims were examined by the adjudicating authority and the first appellate authority on the basis of the records, ER-2 returns, and verification by the Range Superintendent. The authorities found that the respondent could not have utilized the cenvat credit in the ordinary course as it was a 100% EOU and that the refund had been correctly restricted wherever input services were not used in manufacture. Reliance was placed on Circular No. 120/01/2010-ST dated 19.1.2010 and the interpretation of Notification No. 5/2006-CE(NT) dated 14.3.2006 to hold that one-to-one correlation of goods manufactured and exported was not required.

Conclusion: The Revenue failed to dislodge the factual and legal findings supporting sanction of refund. The refund of unutilized cenvat credit was upheld and the appeals were rejected.

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