Rule 5 of Cenvat Credit Rules, 2004 provides refund of unutilized cenvat credit in case the exporter is not able to utilize the credit due to export.

Prior to 14-3-2006, rule 5 was not containing specific provisions for refund of cenvat credit in case of export of taxable services. The rule 5 was replaced by Notification no. 4/2006 and notification no. 5/2006 has been issued to Prescribes safeguards, conditions and limitations for the purpose of Rule 5 of Cenvat Credit Rules, 2004.

In view of amended provisions, the appellant has filed a refund claim of unutilized cenvat credit due to export of taxable services, for the period April 2005 to. June 2005 July 2005 to September 2005 and October 2005 to December 2005.

Department denied the refund on the ground that the above amendment are prospective in nature and refund for the prior period can not be allowed.

While rejecting the departmental argument, honorable CESTAT observed as under:

"We, therefore, hold that in the present circumstances, where the refund claims were filed after the amendment, and satisfies every requirement of Rule 5 and the notification issued thereunder, the refund, cannot be rejected as there was no condition in the notification or rules that such refund would apply only in respect of the exports made after 14-3-2006. Once the refunds are under the amended rules and the notification issued thereunder, as already held, the same cannot be denied merely because they relate to the exports made prior to the date of amendment." 

[For full text of judgment - visit 2008 -TMI - 4049 - CESTAT, MUMBAI]

Refund of Unutilized Cenvat Credit: exporters meeting amended Rule 5 requirements may claim refunds despite pre amendment exports. Whether refund under Rule 5 of the Cenvat Credit Rules, 2004 extends to unutilized credit attributable to export of taxable services rendered before the rule was amended on 14-3-2006. Where refund claims were filed after the amendment and complied with the requirements of Rule 5 and the notifications, the tribunal rejected the prospectivity argument and concluded that acceptance of claims cannot be conditioned on the exports having taken place after the amendment date.