REFUND OF CENVAT CREDIT

[Mr. M. GOVINDARAJAN]

       Rule 5 of CENVAT Credit Rules, 2004 ('Rule' for short) deals with the refund of CENVAT credit.   It provides where any input service is used in the manufacture of final product which is cleared for export under bond or letter of undertaking, as the case may be, or used in the intermediate product for export, or used in providing output service which is exported, the CENVAT credit in respect of the input or input service so used shall be allowed to be utilized by the manufacturer or provider of output service towards payment of-

 ·  Duty of excise on any final product cleared for home consumption or for export on payment of duty; or

·  Service tax on input service

 and where for any reason such adjustment is not possible, the manufacturer or the provider of output service shall be allowed refund of such amount subject to such safeguards, conditions and limitations, as may be specified by the Central Government, by notification.

       No refund of credit shall be allowed if the manufacturer or provider of output service avails of drawback allowed under the Customs and Central Excise duties Drawback rules, 1995 or claims rebate of duty under the Central Excise Rules, 2002, in respect of such duty; or claim rebate of service tax under the Export of Service Rules, 2005 in respect of such tax.

       No credit of the additional duty leviable under Sec. 3(5) of the Customs Tariff Act shall be utilized for payment of service tax on any input service.

       Rule 5A provides that where a manufacturer has cleared final products in terms of notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 20/2007-Central Excise, dated 25.4.2007 and is unable to utilize the CENVAT credit of duty taken on inputs required for manufacture of final products specified in the notification, other than final products which are exempted or subject to NIL rate of duty, for payment of duties of excise on the said final products, then the Central Government may allow the refund of such credit subject to such procedure, conditions and limitations, as may be specified in the notification.

CASE LAWS:

1. Micro Computers V. Commissioner of Central Excise, Vapi - 2008 -TMI - 2500 - CESTAT, AHMEDABAD

       The applicant was forced by the departmental authorities as part of year end revenue mobilization effort to pay from PLA in spite of sufficient balance in CENVAT credit account.   The refund is admissible in cash or by way of credit entry in PLA.

2. WNS Global Services (P) Ltd., V. Commissioner of Central Excise, Mumbai - 2008 -TMI - 4049 - CESTAT, MUMBAI

The appellants are engaged in providing Business Auxiliary Services and the export of the said services.   They were availing benefit of CENVAT credit under CENVAT Credit Rules, 2004 in respect of input services used by them in respect of business auxiliary services.   Since the appellants were unable to utilize the CENVAT credit in respect of input services availed by them they filed refund claim in respect of unutilized credit for the period April 2005 to June 2005, July 2005 to September 2005, October 2005 to December 2006 as per provisions of Notification No. 4/2006, dated 14.3.2006 by which Rule 5 was substituted.   Prior to substitution, the rule did not provide for refund of unutilized credit to the producer of output service, the claim was rejected by the Assistant Commissioner and his order was upheld by the Commissioner (Appeals)

       The tribunal held that where the refund claims were filed after the amendment and satisfies every requirement of Rule 5 and notification issued there under, the refund therefore cannot be rejected as there was no condition in the notification or rules that such refund would apply in respect of the exports made after 14.3.2006.   Once the refunds are under the amended rules and the notification the same cannot be denied merely because they relate to the exports made prior to the date of amendment.

3. In Re. I. Seva system Pvt. Ltd., - 2007 -TMI - 1454 - COMMISSIONER OF CUSTOMS (APPEALS), BANGALORE

       As no goods are exported under bond and output service exported is exempted, the exclusion clause under Rule 6(6) of CENVAT Credit Rules, 2004 not attracted and no refund of credit of input/input service available under the impugned rules.

4. Motorola India Pvt. Ltd., V. Commissioner of Central Excise, Bangalore - II - 2008 -TMI - 31682 - CESTAT (Bangalore)

       The appellants debited excess amount in their CENVAT account to the tune of Rs.158099/-.  The fact was brought to the notice of the department by the appellants and requested to correct the error.   There is a simple arithmetical mistake.   The departmental authorities could have advised to adjust the excess amount towards payment of duty for subsequent periods.   But they advised the appellants to file a claim of refund.   The amount erroneously paid in excess does not find mention in any invoices.   In that sense, the amount paid should be considered as deposit and not duty.   In any case the denial of refund claim for the excess amount paid on account of clerical error is unjustified.

5. Commissioner of Central Excise V. Nag Polymers (P) Ltd., - 2008 -TMI - 31681 - CESTAT, New Delhi

       The assessee had stopped manufacturing and has also surrendered registration.   The utilization of CENVAT credit is not permissible.   The lower appellate authority ordered cash refund.   The granting of the present appeal would effectively lead to denial of justice as the respondent is no more an assessee who can operate a CENVAT credit.

6. Union of India V. Slovak Indian Trading Co. Pvt. Ltd., - 2006 -TMI - 606 - HIGH COURT OF KARNATAKA (BANGALORE)

       Where an assessee has stopped production due to the closure of his factory refund of unutilized credit has to be made.

7. Gauri Plasti culture (P) Ltd., V. Commissioner of Central Excise - 2006 -TMI - 589 - Appellate Tribunal, Mumbai

       Where the assessee has been prevented from untilising the CENVAT credit by department's insistence to pay duty in cash from the PLA, the assessee can debit the duty in the credit account and claim the refund of the same paid in cash.

8. Commissioner of Central Excise V. Kanak Agri Tech - 2007 -TMI - 2019 - CESTAT, MUMBAI      

Refund of CENVAT credit on input was held as admissible to SSI unit when goods were exported by it as SSI Exemption Notification No. 8/2003-CE does not bar credit of inputs used in goods exported.

9. Commissioner of Central Excise V. Paris Waves - 2008 -TMI - 3977 - CESTAT, BANGALORE

       For delay in refund of CENVAT credit interest in terms of Sec. 11BB of Central Excise Act is payable.