EOU entitled to credit refund for supplies to SEZs under Rule 5 of CCR

The Tribunal allowed the appeal, setting aside the impugned order denying the refund claim under Rule 5 of CCR for supplies made to SEZs and EOUs by an EOU. The Tribunal held that supplies to SEZs and EOUs, when exported and manufactured by the assessee, are entitled to benefits, including credit refunds on inputs services under Rule 5 of CCR. The matter was remanded for processing the refund claim, specifically for quantifying the refund, and the appeal was allowed accordingly.

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Issues:
Denial of refund claim under Rule 5 of CCR for supplies made to SEZs and EOUs by an EOU.

Analysis:
The appeal challenges the denial of a refund claim under Rule 5 of CCR for supplies made by an EOU to SEZs and EOUs. The appellant, a manufacturer of carton boxes, supplied goods to SEZ units and claimed a refund on unutilized cenvat credit for a specific period. The adjudicating authority rejected the claim, stating that supplies to SEZs and EOUs do not qualify under Rule 5 of CCR. The Commissioner (Appeals) upheld this decision.

The appellant argues that supplies to SEZs and EOUs, being exported, are entitled to benefits, including credit refunds under Rule 5. The appellant cites various decisions to support their claim. On the contrary, the respondent reiterates the findings of the impugned order, referencing the case of Sai Wardha Power Ltd. Vs CCE Nagpur, where it was held that an EOU cannot claim rebate.

The key issue in the appeal is the eligibility of the refund claim under Rule 5 of CCR for inputs used in final products supplied to SEZs and EOUs. The Tribunal notes that supplies to SEZs and EOUs, when exported and manufactured by the assessee, are entitled to all benefits, including credit refunds on inputs services under Rule 5 of CCR. Citing the Hon'ble Gujarat High Court decision in CCE Vs NBM Industries, the Tribunal emphasizes that such supplies are eligible for refunds. The Tribunal also refers to relevant paragraphs of the decision to support its stance.

Further, the Tribunal highlights a Division Bench decision of the Madras High Court and a decision of the Apex Court in Virlon Textile Mills Ltd. v. Commissioner of C. Ex., Mumbai, to support the appellant's claim. Additionally, the Tribunal mentions a recent decision where supplies to SEZs were allowed benefits, indicating that the appellant is entitled to claim a refund under Rule 5 of CCR. As the adjudicating authority did not assess the issue on merits, the impugned order is set aside, and the matter is remanded for processing the refund claim. The remand is specifically for determining the quantification of the refund, and the appeal is allowed in these terms.

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