Cenvat credit refund on de-bonding stock upheld after department accepted eligibility of input credit under the rules.

Cash refund of duty and Cenvat credit relating to inputs and stock lying at the time of de-bonding of a 100% EOU was found admissible. The dispute centred on whether credit attributable to raw materials and finished or semi-finished goods could be refunded in cash. The department later dropped the proposed recovery proceedings and accepted that credit taken on the relevant inputs and stock was allowable under Rule 3(1)(i), (vii) and (via) of the Cenvat Credit Rules, 2004. In light of that position, the challenge to the refund could not survive, and the impugned order was set aside.

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Issues: Whether the appellant was entitled to refund in cash of the duty/Cenvat credit relatable to raw materials and finished or semi-finished goods lying in stock at the time of de-bonding of the 100% EOU.

Analysis: The refund dispute turned on the eligibility of credit taken on inputs and goods covered by the de-bonding process. The department had subsequently dropped the show cause proceedings proposing recovery of the allegedly erroneous refund and had itself accepted that the credit availed on the relevant inputs and stock was allowable under Rule 3(1)(i), (vii) and (via) of the Cenvat Credit Rules, 2004. In view of that later adjudication, the challenge to the cash refund no longer survived for consideration.

Conclusion: The refund claim was held to be admissible and the impugned order was set aside in favour of the appellant.

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