CENVAT credit and Rule 5 refund for export-oriented units on duty paid DTA inputs upheld despite exemption availability

A 100% EOU was entitled to avail CENVAT credit on duty paid inputs procured from a DTA unit and, where the credit remained unutilised because the goods were exported, claim refund under Rule 5 of the CENVAT Credit Rules, 2004. The availability of an exemption under Notification No. 22/2003 and Section 5A(1A) of the Central Excise Act did not defeat credit of duty actually paid on the inputs. The Revenue's challenge failed.

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Issues: Whether a 100% Export Oriented Unit was entitled to avail CENVAT credit and claim refund under Rule 5 on duty paid inputs procured from a Domestic Tariff Area unit, notwithstanding the exemption available under Notification No. 22/2003 and the application of Section 5A(1A) of the Central Excise Act, 1944.

Analysis: The refund claim arose from duty paid on inputs procured from a DTA unit and used in exported goods. The dispute turned on whether the EOU, being entitled to exemption on such procurement, could still take credit of the duty actually paid and seek refund of the unutilised credit under Rule 5 of the Cenvat Credit Rules, 2004. The order followed the binding view already taken in the assessee's own matter and the principle affirmed in the earlier decision that a 100% EOU is entitled to CENVAT credit on duty paid inputs and, when the credit cannot be utilised, refund under Rule 5 is available.

Conclusion: The assessee was entitled to CENVAT credit and refund under Rule 5 on duty paid inputs procured from the DTA unit, and the Revenue's challenge failed.

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