A. BACKGROUND

M/s P & P Overseas (“Appellant”) being a 100% Export Oriented Unit (“EOU”) could not utilize the Cenvat Credit for payment of duty on DTA clearances and since the accumulated Cenvat Credit was attributable to the input services which had been used in or in relation to manufacture of the finished products which has been exported out of India, the Appellant filed two refund claims for the period from July 2008 to September 2008 and October 2008 to December 2008 for cash refund of the accumulated Cenvat Credit under Rule 5 of the Cenvat Credit Rules, 2004. The refund claims were decided by Assistant Commissioner by two separate orders.

(i)       First Refund Claim

The Assistant Commissioner disallowed the refund under Rule 5 of the Cenvat Credit Rules, 2004 to the extent of Rs. 1,82,298/- which represented the Cenvat credit taken in respect of CHA services availed for export of the goods and courier services used in connection with the manufacturing business of the Appellant.

(ii)      Second Refund Claim

The Assistant Commissioner disallowed the refund to the extent of Rs. 2,19,539/- which represented the Cenvat credit in respect of CHA services used for export of the goods and courier services used in connection with the manufacturing business of the appellant.

(iii)    Grounds for rejections

These refund claims were disallowed on the following ground-

• The CHA services and courier services are not eligible for Cenvat Credit; and
• The export proceeds have not been received by the appellant.

(iv)     Appeal to Commissioner (Appeals)

The Appellant preferred an appeal before the Commissioner (Appeals). The Commissioner (Appeals) by a common order-in-appeal dated 21/02/11 dismissed the appeals.

B. Submissions made before the Hon’ble CESTAT

The learned Counsel for the Appellant, pleaded that first ground for disallowing the refund claim under Rule 5 of the Cenvat Credit Rules is that the CHA services and courier services are not covered by the definition of input service, that this issue has already been decided by the Commissioner (Appeals) in the appellant’s own case in the appellant’s favour vide order-in-appeal No. 1-5/BK/DDL/12 dated 02/01/2012, that the second ground of rejection is that the export proceeds have not been received, that this condition is nowhere mentioned in the Notification No. 5/2006-CE (NT) dated 14/03/06 issued by the Government under Rule 5 of the Cenvat Credit Rules, 2004 and that in view of this, the denial of cash refund of the accumulated Cenvat credit under Rule 5 of the Cenvat Credit Rules, on the ground that the sale proceeds in respect of the goods exported has not been received is totally in correct and that in view of the above, the impugned order is not correct.

C. Held

There is no dispute that the refund amount under Rule 5 of the Cenvat Credit Rules, 2004 which have been disallowed is in respect of the Cenvat Credit availed in respect of CHA service availed for export of the goods and courier service availed in connection with manufacturing business of the appellant company. The Department has denied the refund claims on the ground that the Cenvat Credit in respect of these two services is not admissible. However, this issue stands decided in Appellant’s favour in the Appellant’s own case by the Commissioner (Appeals) vide order-in-appeal dated 02/01/12. In view of this, the first ground on which the refund claims have been denied would no longer be valid.

As regards the other ground for denial of the refund claims that the sale proceeds in respect of goods exported have not been received, it is seen that this condition is neither there in Rule 5 of the Cenvat Credit Rules nor this condition has been prescribed in the Notification No. 5/2006-CE (NT) issued under Rule 5 of the Cenvat Credit Rules.

In view of this, the denial of refund claim on the ground that the export proceeds have not been received is not sustainable and accordingly the Hon’ble CESTAT allowed the refund claims filed by the Appellant.

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Note:  It is important to note that vide the Union Budget 2012, Rule 5 of the Cenvat Credit Rules got substituted, by a new rule, resulting into various changes in the refund mechanism available for exporter of goods/ services.

The Central Board of Excise and Customs had issued Notification No. 27/2012–CE (N.T.) dated June 18, 2012 which has superseded earlier Notification [No. 5/2006-CE (NT) dated 14/03/06] in this regard.

The Notification dated June 18, 2012 prescribes new procedures, safeguards, conditions and limitations with respect to the manner in which the refund would be claimed by the exporter of goods/ services.

Accordingly, the procedures, conditions etc. laid down under the Notification dated June 18,2012 are now required to be complied with for the purpose of filing refund claim under Rule 5 of the Cenvat Credit Rules, 2004.

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