Export refund on readymade garments cannot be reduced by a retail-sale-price tariff valuation notification.

A tariff-value notification tied to retail sale price could not be used to curtail refund on exported readymade garments where no retail sale price was required to be declared and the goods were not covered by the valuation regime under Section 4A. On that basis, the restriction on refund of export-related deemed credit was unsustainable. Refund of accumulated deemed credit under Rule 5 of the Cenvat Credit Rules, 2002, read with the export rebate notification, was therefore admissible, and the denial of part of the refund was rejected.

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Issues: (i) Whether Notification No. 20/2001-CE (NT) could be applied to exported readymade garments for denying a part of the refund claim when no retail sale price was required to be declared; (ii) whether refund of accumulated deemed credit under Rule 5 of the Cenvat Credit Rules, 2002 read with Notification No. 54/2001-CE (NT) was admissible.

Issue (i): Whether Notification No. 20/2001-CE (NT) could be applied to exported readymade garments for denying a part of the refund claim when no retail sale price was required to be declared.

Analysis: The notification fixed tariff value for readymade garments at 60% of the retail sale price required to be declared on retail packages under the Standards of Weights and Measures Act, 1976 or the rules made thereunder. Exported garments were not required to bear a retail sale price, and the goods were also not notified under Section 4A of the Central Excise Act, 1944. In that situation, the basis adopted by the department to apply the notification for restricting refund was held to be unsustainable.

Conclusion: Notification No. 20/2001-CE (NT) was held inapplicable to the exported goods, and the denial of refund on that basis was rejected.

Issue (ii): Whether refund of accumulated deemed credit under Rule 5 of the Cenvat Credit Rules, 2002 read with Notification No. 54/2001-CE (NT) was admissible.

Analysis: The refund claim arose from export of readymade garments under bond and was founded on the deemed credit scheme under Notification No. 54/2001-CE (NT). Once Notification No. 20/2001-CE (NT) was found inapplicable, there remained no basis to curtail the refund of accumulated deemed credit claimed on exports.

Conclusion: The refund claim was held admissible and the order rejecting part of the refund was set aside.

Final Conclusion: The appeals succeeded and the assessee was granted the refund relief claimed on export of readymade garments.

Ratio Decidendi: A notification fixing tariff value by reference to retail sale price cannot be used to deny refund on exported goods where no retail sale price is required to be declared and the goods are not covered by the valuation regime relied upon by the department.

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