Excise duty refund on duty-paid inputs for bonded exports is not barred by a customs drawback objection when no Modvat credit was taken.

Duty-paid inputs used in goods exported under bond may qualify for refund of excise duty where no Modvat credit has been taken, even if the export is connected with a DEEC arrangement through a merchant exporter. The Tribunal treated the decisive factors as proof that the inputs suffered duty, that no credit was availed, and that the finished goods were exported under bond. It further distinguished customs drawback from excise duty credit, holding that a drawback objection by itself did not amount to a double benefit that could defeat refund under Notification No. 85/87-CE. The refund claim was therefore upheld with consequential relief.

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Issues: Whether the assessee was entitled to refund of excise duty paid on inputs where the export goods were cleared under bond through a merchant exporter and no Modvat credit had been taken, and whether the drawback/DEEC objection could defeat the refund claim.

Analysis: The refund claim arose under Notification No. 85/87-CE dated 01.03.1987. The dispute centred on whether the exported goods were covered by the DEEC arrangement and whether that circumstance barred availment of Modvat credit or refund. The Tribunal noted that the earlier remand had required only verification of the DEEC aspect, but the material on record showed that the inputs had suffered duty, no Modvat credit had been availed, and the finished goods had been exported under bond. Relying on the settled distinction between customs drawback and excise duty credit, and on the scheme of Rule 57A, Rule 57F(3) and Rule 57G of the Central Excise Rules, the Tribunal held that drawback relatable to customs duty did not amount to double benefit against refund of central excise duty paid on inputs.

Conclusion: The assessee was entitled to refund of the duty paid on the inputs, and the appeal was allowed with consequential relief.

Final Conclusion: The denial of refund was set aside because the duty-paid inputs used in exported goods could not be denied refund merely on the ground of the DEEC or drawback objection when no Modvat credit had been taken.

Ratio Decidendi: Where duty-paid inputs are used in goods exported under bond and no Modvat credit has been availed, refund of the excise duty on inputs cannot be denied merely because customs drawback or a similar export benefit is involved.

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