Unutilized Cenvat credit refund allowed for deemed export supplies to a 100% export oriented unit.

Refund of unutilized Cenvat credit under Rule 5 was held admissible where a domestic tariff area unit supplied goods to a 100% export oriented unit against CT-3 certificates and the supplies were treated as deemed export. The analysis followed NBM Industries and applied the principle that refund cannot be denied merely because the clearances were not actual exports, so long as the credit had accumulated on inputs used in those supplies. Rejection of the refund on the ground of absence of actual export was therefore unsustainable, and the refund claim was directed to be granted with interest according to law.

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Issues: Whether refund of unutilized Cenvat credit under Rule 5 of the Cenvat Credit Rules, 2004 was admissible where a domestic tariff area unit supplied goods to a 100% export oriented unit against CT-3 certificates and the supplies were treated as deemed export.

Analysis: The refund claim arose from clearances made to a 100% export oriented unit under Notification No. 22/2003-CE against CT-3 certificates, where the supplier was unable to utilize accumulated credit. The issue of entitlement to refund on such supplies had already been settled by the Gujarat High Court in NBM Industries, which held that refund of Cenvat credit on inputs used in goods cleared to a 100% export oriented unit could not be denied merely because the transaction was treated as deemed export. On that basis, rejection of the refund on the ground that the assessee had not proved actual export was unsustainable.

Conclusion: The refund under Rule 5 of the Cenvat Credit Rules, 2004 was admissible and the rejection was wrong, in favour of the assessee.

Final Conclusion: The appeal succeeded, the rejection order was set aside, and the refund claim was directed to be granted with interest according to law.

Ratio Decidendi: Refund of accumulated Cenvat credit cannot be denied to a manufacturer supplying goods to a 100% export oriented unit merely because the supply is treated as deemed export rather than actual export.

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