By TIOL News Service

MUMBAI, NOV 03, 2014: THE appellant filed claims for refund of credit of duty paid on PTA & MEG used in the manufacture of PSF exported during the period July 2009 to December 2009 under Rule 5 of CCR, 2004.

A SCN was issued proposing rejection of the refund claim on the allegation of duty free imports and double benefits.

The Adjudicating Authority allowed the refund claim but the same, in Revenue appeal, were rejected by the Commissioner(A).

Before the CESTAT, the appellant submitted -

a) On an average, 80% of the production of PSF is sold in domestic market on payment of duty and balance around 20% of PSF is exported.

b) Out of the total requirement of inputs like MEG & PTA, around 10 to 15% is imported duty free under DEEC scheme.

c) Considering the stock holding of inputs for around seven to eight days and finished goods stock holding of the same period, and also based on the records maintained by following FIFO method, duty free imported inputs were not used in the manufacture of PSF exported during the disputed period.

d) Only duty paid CENVAT availed inputs were used in manufacture of PSF exported during the disputed period, which was proved through documentary evidences.

e) By availing DEEC scheme for exports and claiming refund of duty paid on inputs used in goods exported, no double benefit has been accrued to the Appellants.

f) Even if exports are made under DEEC/DEPB/Advance Licence schemes and duty-free inputs are used, refund of unutilized credit under Rule 5 of CCR is admissible, as there is no double benefit, as held by the Tribunal in U.K. Paints (India) 2004-TIOL-1092-CESTAT-DEL etc.

g) Rule 5 of CCR being a beneficiary piece of legislation, the refund cannot be denied.

h) One to one co-relation of the inputs and export goods is not required for claiming refund of accumulated credit, under Rule 5 of CCR, 2004.

It is further submitted that that the statement substantiating the use of duty paid PTA & MEG in the manufacture of PSF exported was got verified by the AR as directed by the Tribunal and the same has not been proved to be erroneous. The appellant also submitted that as per Foreign Trade Policy 2009-14, it would not be possible to get double benefit, therefore, the impugned orders should be set aside and appeals allowed.

The AR submitted that once the export is made under advance licence under authorisation there would be double benefit to the appellant; that appellant could have utilised the unutilised CENVAT credit for payment of duty for domestic clearance. It is further submitted that duty free imported PTA & MEG mandatorily has to be used for manufacture of export production and, therefore, the Commissioner (Appeals) had rightly rejected the refund claims.

The Bench observed -

++ The detailed chart/statement produced by the appellant showing the use of duty paid PTA and MEG in the manufacture of PSF export has not been discarded by any supporting evidence by the revenue. Therefore, the statement produced by the appellant is reliable document to substantiate that the duty paid goods have been used in the manufacture of final export product. It is not possible to identify the actual use of PTA and MEG duty paid in manufacture of PSF exported in view of the continuing process.

++ We find that till 01.04.1997 the Export Policy provisions were different and duty free imported materials against Advance Licence were freely transferable after fulfilment of export obligation, where the Modvat/Proforma credit facility or excise relief under Rule 191B of CER 1944, were availed and hence could have lead to possible double benefit . But after 1.4.1997 Foreign Trade Policy (FTP), the position have been changed and going through the provisions relevant for the impugned period it is clear that it would not be possible to get double benefit.

Adverting to the decisions in U.K. Paints (India),Ispat Industries Ltd., Bhilwara Spinners Ltd. cited by the appellant the Bench concluded that it was clear that to claim refund under Rule 5 of CCR, 2004 on export of the finished goods, the credit is accumulated and the same cannot be utilised otherwise; that as per the provisions of Foreign Trade Policy post 1997 [FTP 2009-2014, paras 4.1.4, 4.1.5 ], no double benefit is available. The CESTAT also referred to the decision in MothersonSumi Electric Wire 2010-TIOL-144-CESTAT-BANG where the Tribunal has held that no one-to-one correlation was required between the inputs and exported goods.

Holding that the appellant had not availed any double benefit under the Foreign Trade Policy 2009-14 and are entitled to claim refund of CENVAT credit accumulated & unutilised on export of the finished goods, which appellant was not able to utilise otherwise under Rule 5 of CENVAT Credit Rules, 2004, the order of Commissioner(A) was set aside and the appeals were allowed with consequential relief.

(See 2014-TIOL-2170-CESTAT-MUM)