SABARE INTERNATIONAL Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) THE relevant facts of the case, in brief, are that the appellants are engaged in the manufacture and export of made -up textile articles falling under Chapter 63 of the First Schedule to the Central Excise Tariff Act, 1985. The appellant filed a refund claim of Rs. 18,67,738/ - on 23 -8 -2006 of accumulated credit availed on input service used in the export of goods in terms of Notification No. 5/2006 -C.E., (N.T.), dated 14 -3 -2004 issued under Rule 5 of Cenvat Credit Rules, 2004. Show -cause notice dated 22 -11 -2006 was issued proposing to reject the refund claim under Rule 6 of the Cenvat Credit Rules, 2004 r/w Section 11B of the Central Excise Act, 1944. It has been alleged that the appellant is manufacturing exempted goods and they are not eligible to avail Cenvat credit under Rule 6 of the Cenvat Credit Rules, 2004. The adjudicating authority rejected the refund claim. By the impugned order, the Commissioner (Appeals) upheld the adjudication order. The learned counsel on behalf of the appellant submits that show -cause notice proposed to reject the refund claim under Rule 6 of the Cenvat Credit Rules, 2004. But the adjudicating authority and the first appellate authority rejected the refund claim on the ground of violation of First proviso to Rule 5 of the Cenvat Credit Rules, 2004, which is beyond the scope of the show -cause notice. He submits that the first proviso to Rule 5 would apply in respect of duty and in the present case they have filed the refund claim on input service credit and therefore it is not hit by the first proviso to Rule 5. Regarding the other issue, insofar as ineligibility of availment of Cenvat Credit under Rule 6 of the Cenvat Credit Rules, 2004, the learned Advocate drew the attention of Bench sub -rule (6)(v) of Rule 6 of the Cenvat Credit Rules, 2004. In the present case, the appellant executed a LUT which was not renewed at that point which cannot be a reason for rejection of the refund claim. He relied upon the decision of the Tribunal in the case of Well Known Polyesters Ltd. v. CCE : 2011 (267) E.L.T. 221 : 2012 (25) S.T.R. 411 and the decision of the Hon'ble Bombay High Court in the case of Re -pro India Ltd. v. Union of India : 2009 (235) E.L.T. 614 (Bom.).

(2.) ON the other hand, the learned AR on behalf of Revenue drew the attention of the Bench the relevant portion of the show -cause notice, where it is clearly mentioned the violation of First proviso to Rule 5 of the Cenvat Credit Rules, 2004. It is submitted that Rule 5 was mentioned in the show -cause notice and both the authorities below rightly proceeded within the scope of the show -cause notice. He further submits that the LUT was not renewed and sub -rule 6(v) of Rule 6 would not apply. He further submits that there is no material to draw that they have not filed the drawback claim including the input service credit. It is also submitted that there is no evidence available whether the drawback has been availed under bond or not. He further submits that the execution of LUT is a mandatory condition which cannot be taken lightly and the decision of Well Known Polyesters Ltd. (supra) would not apply.

(3.) COMMISSIONER (Appeals) observed that the appellant has availed drawback and they have not followed the prescribed procedure and have not renewed the LUT and therefore it is hit by the First proviso to Rule 5 of the Cenvat Credit Rules, 2004. On a plain reading of the words "in respect of such duty" in the First proviso to Rule 5 make it clear that no refund of such credit shall be allowed in respect of such duty, if the manufacturer or provider of output service avails drawback allowed under Customs and Central Excise Duties Drawback Rules, 1995. In the present case, the appellant filed the refund of credit in respect of input service credit. It is contended by the learned AR on behalf of Revenue that there is no evidence available that the drawback claim would not be included with the input service credit. The word "drawback" defined under Rule 2(a) of Customs and Central Excise Duties Drawback Rules, 1995, as it stood during the relevant period as drawback in relation to any goods manufactured in India and exported, means a rebate of duty chargeable on any imported material or excisable materials used in the manufacture of such goods. There is no material available that the appellant claimed the input service credit in their drawback claim. Hence, I do not find any force in the submission of the learned AR. The other issue is that the appellants are manufacturing exempted goods and they are not entitled to avail Cenvat credit in terms of Rule 6 of CENVAT Credit Rules, 2004 and consequently refund of the amount is not eligible. I find that sub -rule (6)(v) of Rule 6 of the Cenvat Credit Rules, 2004, provides that the clauses (i), (ii), (iii) and (iv) to proviso to sub -rule (6) shall not be applicable in the case of excisable goods removed without payment of duty for export under bond in terms of provisions of the Central Excise Rules, 2002. There is no dispute that the goods were exported and the adjudicating authority observed that the appellant did not renew the LUT for the period covered under the refund claim. The Division Bench of the Tribunal in the case of Well Known Polyesters Ltd. (supra) following the decisions of the Hon'ble High Courts in similar situation held as under: -