Mandatory Cenvat credit utilisation before cash payment barred refund under the exemption notification.

Notification No. 20/2007-CE required a manufacturer, where all goods were exempt, to first utilise the full Cenvat credit available at the end of the month and pay only the balance duty in cash. The assessee instead paid duty through PLA and then sought refund, which was treated as contrary to the mandatory sequence prescribed by the exemption scheme. The cited clarification and precedent supported the view that refund of duty attributable to unutilised credit was not admissible. The refund claim was therefore rejected and the impugned order was upheld.

---

---

Issues: Whether the assessee could claim refund where, under the exemption notification, the whole of the available Cenvat credit was required to be utilised first before payment of duty in cash.

Analysis: Para 2B of Notification No. 20/2007-CE required the manufacturer, where all goods were eligible for exemption, to first utilise the whole of the Cenvat credit available on the last date of the month and pay only the balance in cash. The assessee did not follow that sequence and instead paid duty from PLA and then claimed refund. The condition in the notification was treated as mandatory, and the contrary claim was found inconsistent with the exemption scheme. The cited clarification and precedent were relied upon to support the view that excess refund attributable to unutilised credit was not admissible.

Conclusion: The refund claim was not admissible and the impugned order was upheld against the assessee.

---