Manufacturers in international market, has little scope for utilization of CENVAT for discharge of duty liability, so was held by Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Mumbai while upholding the claim of the assessee.
The appellant, Raychem RPG Pvt Ltd is a ‘hundred percent export-oriented unit (EOU)’ holding ‘letter of permission (LoP)’ from the competent authority under the Foreign Trade Policy and exports the bulk of its manufacture owing to which substantial amounts of credit of tax/duty paid on input service/inputs accumulates in CENVAT credit account with no opportunity for utilization. Such credit is permissible to be released, as refund, under the authority of rule 5 of CENVAT Credit Rules, 2004 in accordance with the procedures prescribed by Central Board of Excise & Customs (CBEC).
It may be stated at the outset that rejection of the whole or any part thereof is to be contemplated only to the extent that export has not occurred or to the extent of being in excess of the computation in accordance with the formula prescribed therein. The formula is intended to ensure that such monetization of credit of taxes/duties paid is limited to deployment in export goods. Credit is a pooling of taxes/duties paid on input service/input used in manufacture of output or rendering of output service and the impossibility of segregation for one-to-one correlation requires such computation of attribution.
C J Mathew, Technical Member held that “An assessee such as the appellant, manufacturing primarily for the international market, has little scope for utilization of CENVAT credit in the normal course of discharge of duty liability. It is not the case of Revenue that the appellant had cleared goods domestically on payment of duty and was, through the refund route, attempting to recover the same; there is a certain lack of logic too in that.
Any remnant by application of formula, and its precise intendment, can trace its origin to input lying unutilized or input service yet to be utilized for manufacture. Its utilization in some subsequent period can be reflected only by restoration of the rejected portion of a claim for refund. The restoration is permitted by law and the availment suffices to entitle inclusion for apportionment towards export of a subsequent quarter. The claim of the appellant has been wrongly discarded by the lower authorities.”
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