2023 (5) TMI 1077 - AT - Central Excise

Interpreting refund conditions under Cenvat Credit Rules: Tribunal rules in favor of appellant

The judgment focused on interpreting conditions for refund under notification No.11/2002C.E (NT) and correlating inputs with exported goods under Rule 5 ... Refund claim - nexus of specific inputs with its different rates to the manufacture of export goods cleared under various A.R.E. 1 (not established) - non-maintenance of records in a proper manner facilitating the possible co-relation of specific inputs to specific Outputs, as required under Rule 5 of Cenvat Credit Rules, 2002 - no sufficient corroborative evidence was available on records to link the input - HELD THAT:- Tribunal while remanding the matter to original authority has held that the appellant is entitled to the refund of the accumulated credit which shall be quantified by the authority below, after looking into their records for which purposes we remand the matter to the original adjudicating authority. In the remand proceedings appellant submitted all the documents required for verification and quantification. All the documents were verified by the jurisdictional range officer and vide his report dated 25.11.2006/ 12.12.2006, referred in the order of original authority observed, “The calculation of refund claim on average basis is found in order.” If on verification of the documents submitted the quantum of refund claim has been found in order by the jurisdictional authorities have been found in order, then the in terms of the CESTAT Order, the refund should have been granted to the appellant. From the CESTAT order, it is observed that in the first round of litigation also the refund was rejected by the lower authorities for the reason that the claim was made on average basis. Tribunal has allowed the appeal and remanded the matter only for re-quantification. The impugned order travels beyond the directions in the order of tribunal and cannot be sustained. Appeal allowed. Issues Involved:The issues involved in this legal judgment include the interpretation of conditions for refund under notification No.11/2002C.E (NT) dated 02.03.2002, the requirement to correlate specific inputs with exported goods under Rule 5 of Cenvat Credit Rules, 2002, the rejection of refund claims made on an average basis, and the entitlement to refund of accumulated credit under Rule 5 of Cenvat Credit Rules, 2002.Interpretation of Conditions for Refund:The judgment highlighted the restrictive condition under notification No.11/2002C.E (NT) regarding the refund of duty on inputs used for exported goods. It emphasized that the refund can only be sanctioned if the claimant is unable to utilize the credit at all and not restricted to home clearances. The failure to correlate specific inputs to specific outputs as required under Rule 5 of Cenvat Credit Rules, 2002 was noted, leading to the conclusion that the refundable amount should be actual and not average. The absence of documentary evidence and the necessity for proper record-keeping were emphasized in determining the eligibility for refund.Correlation of Inputs with Exported Goods:The judgment discussed the appellant's inability to correlate specific inputs with different rates to the manufacture of export goods cleared under various A.R,E. 1 (under bond) due to inadequate record-keeping. It was noted that the appellant's refund claims were made on an average basis without sufficient corroborative evidence, leading to the rejection of the refund claims. The importance of maintaining records for correlation of inputs to outputs under Rule 5 of Cenvat Credit Rules, 2002 was emphasized, and the Tribunal held that the claim was unsubstantiated due to the lack of proper documentation.Rejection of Refund Claims Made on Average Basis:The judgment addressed the rejection of refund claims made on an average basis by the appellant. It was noted that the Hon'ble CESTAT had neither directed to accept these claims nor accepted them as filed on an actual basis. The Tribunal emphasized the need for specific evidence and documentation to support refund claims, citing the absence of documentary evidence as a reason for rejecting the appellant's claims made on an average basis.Entitlement to Refund of Accumulated Credit:The judgment discussed the entitlement of the appellant to the refund of accumulated credit under Rule 5 of Cenvat Credit Rules, 2002. It highlighted the provisions of Rule 5 allowing for the refund of accumulated Modvat credit if the same cannot be adjusted for any reason. The Tribunal held that the appellant was entitled to the refund of the accumulated credit, emphasizing that the only condition for such refund was non-utilization of the credit, and no jurisdiction vested in the Central Excise officer to find out the reason for such non-adjustment. The Tribunal set aside the impugned order and remanded the matter to the original adjudicating authority for quantification of the refund amount.Separate Judgment by the Judges:There was no separate judgment delivered by the judges in this case.