Accumulated Cenvat Credit Refund Allowable On Export Of Goods Even If Exempted From Central Excise Duty: CESTAT

The Allahabad Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that refund of accumulated Cenvat Credit is allowable on export of goods even if they are exempted from payment of Central Excise Duty.

The bench of P.K. Choudhary (Judicial Member) has observed that exporting under bond is only a procedure. The claim for refund should not be disallowed when the fact of the export is not in dispute.

The appellant/assessee is engaged in the manufacture of menthol crystals, demenholized peppermint oil, peppermint oil, etc. falling under chapters 29, 30, and 33 of the Central Excise Tariff. Most of their sales are for export to countries like France, the USA, the UK, etc. In terms of Central Excise Notification No. 12/2012 dated March 17, 2012, all the final products of the appellant became exempt from payment of duty. Appellant filed a refund claim for Rs. 4,00,278/-, claiming refund of accumulated Cenvat Credit for the period from April 2017 to June 2017 under Rule 5 of Cenvat Credit Rules, 20041, read with Notification No. 27/2012-CE dated June 18, 2012.

The refund claim pertained to that portion of the Cenvat Credit that was attributable to the export of goods. The Jurisdictional Deputy Commissioner rejected the claim after observing that, in terms of Rule (6)(1) of CCR, 2004, the appellant was not eligible to avail Cenvat Credit. The refund under Rule 5 of the CCR of 2004 is admissible to those manufacturers who are engaged in the manufacture of dutiable goods.

On appeal, the Commissioner (Appeals) upheld the order of the Lower Authority after observing that Cenvat Credit is not available on input and input services used exclusively in the exempted goods. However, in terms of Rule 6 (6)(v) of CCR, 2004, Cenvat Credit is allowable in cases of export under bond. In view of Notification No. 42/2001-CE, the appellant was not eligible to export goods under bond, and therefore the refund claim is liable to be rejected.

The assessee contended that there is no dispute over the export of goods. These are eligible for refund under Rule 5 of the CCR, 2004. Non-clearance of exempted goods under bond is only a procedural issue. The substantive benefit of a refund should not be denied for procedural or technical reasons. It is the policy of the government that exports should be zero-rated; only goods should be exported and not taxes. There is no condition in Notification No. 27/2012 dated June 18, 2012, that goods should be exported under bond. For the earlier period, they have been allowed a refund by the order of the Commissioner (Appeals).

The issue raised was whether a refund of accumulated Cenvat Credit is allowable on the export of goods that are exempt from payment of duty, particularly when the same has not been exported under bond.

The tribunal held that input credit is allowable when exempted goods are exported under bond. A refund under Rule 5 of the CCR of 2004 is allowable to the manufacturer, who exports the final products, which are exempt from duty.

Counsel For Appellant: Ashish Vaish

Counsel For Respondent: A. K. Choudhary

Case Title: M/s Kancor Ingredients Ltd. Versus Commissioner, CGST, Noida

Case No.: Excise Appeal No.70227 of 2020

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