Refund of unutilised Cenvat credit can coexist with customs drawback where the drawback relates only to customs duty components.

Refund of unutilised Modvat/Cenvat credit on inputs used in exported goods was held admissible where the manufacturer had not availed drawback or rebate in respect of the same duty. Rule 5 of the Cenvat Credit Rules, 2002 read with Notification No. 11/2002-C.E. (N.T.) was read to bar refund only when the manufacturer himself had claimed the relevant drawback or rebate. Customs drawback claimed by a merchant-exporter was treated as relating to a different duty component, so it did not create a double benefit for the manufacturer. The refund claim therefore could not be denied merely because customs drawback had been taken on the export consignment.

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Issues: Whether refund of unutilised Modvat/Cenvat credit on inputs used in exported goods can be denied on the ground that the merchant-exporter claimed customs drawback, and whether such refund would amount to double benefit.

Analysis: Refund of credit under Rule 5 of the Cenvat Credit Rules, 2002 read with Notification No. 11/2002-C.E. (N.T.) was held to depend on the manufacturer's entitlement and the conditions in the notification. The bar in the proviso was read as applying where the manufacturer himself had availed drawback or rebate in respect of such duty. The Board's circular clarified that customs drawback and refund of unutilised CENVAT credit relate to different duty components, and that where only the customs portion of drawback is claimed, refund of excise or countervailing duty credit is not prohibited. Since the drawback availed by the merchant-exporter was relatable only to customs duty, there was no duplication of benefit for the manufacturer.

Conclusion: Refund of unutilised Modvat/Cenvat credit was admissible to the manufacturer, and the claim could not be denied merely because the merchant-exporter had claimed customs drawback.

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