CENVAT refund adjustment cannot exclude stock-related credit where the governing rule does not permit such reduction.

Rule 5 of the CENVAT Credit Rules, 2002 and Notification No. 11/2002-C.E. (N.T.) did not authorise the Revenue to reduce a refund claim by excluding credit relatable to raw materials and finished goods lying in stock on the closing date. The Court found that the refund had to be assessed against the credit standing in the assessee's CENVAT account for the relevant quarter, and the adjustment made by the authorities was inconsistent with the statutory scheme. The impugned order was set aside and the assessee was entitled to the balance refund.

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Issues: Whether the Revenue could reduce the assessee's refund claim under Rule 5 of the CENVAT Credit Rules, 2002 by adjusting the credit relatable to raw materials and finished goods lying in stock, and thereby restrict the refund to the balance remaining in the credit account.

Analysis: The refund was claimed against the credit standing to the assessee's CENVAT credit account for the relevant quarter under Rule 5 of the CENVAT Credit Rules, 2002 read with Notification No. 11/2002-Central Excise (N.T.) dated 01.03.2002. The Court held that neither the rule nor the notification authorised the Revenue to make the disputed adjustment by excluding credit attributable to stock of raw materials and finished goods as on the closing date. The methodology adopted by the authorities was therefore found to be inconsistent with the governing statutory scheme.

Conclusion: The adjustment made by the Revenue was impermissible, the impugned order was set aside, and the assessee was held entitled to the balance refund of Rs. 77,453/-.

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