2006 (4) TMI 21 - AT - Central Excise

Central Excise - Cenvat/Modvat - The refund of Cenvat/Modvat credit has no relation to grant of drawback relatable to customs duties - No merit in contention of double benefit

Summary

Issues:
1. Entitlement to refund of unutilized Modvat credit on inputs used in production of exported goods.
2. Interpretation of Rule 5 of Cenvat Credit Rules, 2002 regarding refund eligibility.
3. Allegation of conferring double benefit of drawback and Modvat credit.
4. Clarification on the relationship between Customs duty drawback and Central Excise duty refund.
5. Application of Rule 57F(14) of Central Excise Rules, 1944 in the context of refund eligibility.
6. Clarification on the admissibility of refund of unutilized credit under CENVAT rules for goods cleared for export.

Analysis:
1. The dispute in this case revolves around the entitlement of the appellant to a refund of unutilized Modvat credit on inputs used in the production of exported goods. The appellant, a manufacturer of aluminium pistons, had claimed a refund of outstanding Modvat credit, which was contested on the grounds of potential double benefit due to the merchant-exporters claiming customs drawback. The Commissioner's order favored the respondent, citing the Customs and Central Excise Duties Drawback Rules 1995. However, the appellant argued that they had not claimed any duty drawback and were eligible for the refund under Rule 5 of the Cenvat Credit Rules, 2002, as per Notification No. 11/2002-C.E. (NT), dated 1-3-2002. The Tribunal, after examining the case laws and provisions, held that the manufacturer's eligibility for refund should not be denied if the exporter did not avail of drawback or rebate, as per Rule 5 of the Cenvat Credit Rules.

2. The Revenue contended that the Commissioner's order conferred a double benefit of drawback and Modvat credit, which was refuted by the respondent's counsel. The counsel argued that the benefits of drawback and Modvat credit were distinct as they related to different duties - Customs duty and Central Excise duty, respectively. Referring to Circular No.83/2000-Cus., the clarification highlighted that the prohibition on refund under Rule 57F(14) of the Central Excise Rules, 1944, applied only to the availment of drawback concerning Central Excise or Countervailing duty. The clarification emphasized that no double benefit was available to the manufacturer when only the Customs portion of the drawback was claimed, allowing the refund of unutilized credit of Central Excise/Countervailing duty paid on inputs used in exported products.

3. The Board's clarification confirmed that the refund of Modvat credit or Cenvat Credit (Central Excise duty) was unrelated to the grant of drawback concerning Customs duties. The clarification and examination of drawback rates established that the benefit to the merchant-exporter was specific to Customs duty, not Central Excise duty paid on inputs. Consequently, the Tribunal rejected the appeals, concluding that there was no merit in the Revenue's claim of conferring a double benefit on the appellant. The judgment emphasized the distinct nature of Customs duty drawback and Central Excise duty refund, ensuring clarity on refund eligibility under the relevant rules and notifications.