2019 (11) TMI 950 - AT - Central Excise

Tribunal affirms refunds for goods to Export Oriented Unit under CENVAT Credit Rules

The Tribunal upheld the Commissioner (Appeals)' decision to grant refunds of unutilised CENVAT credit to the appellant for goods supplied to a 100% Export ... Refund of unutilised CENVAT credit - deemed export - interpretation of Rule 5 of the CENVAT Credit Rules, 2004 - application of judicial precedents in refund claimsRefund of unutilised CENVAT credit - deemed export - interpretation of Rule 5 of the CENVAT Credit Rules, 2004 - Whether refund of unutilised CENVAT credit under Rule 5 is admissible where inputs/input services are used in manufacture of goods cleared to a 100% Export Oriented Unit (deemed export). - HELD THAT: - The Tribunal affirmed the Commissioner (Appeals) finding that the refund sanctioning authority had erroneously interpreted Rule 5 by holding that refund is permissible only where goods are exported out of India and not where finished goods are supplied to a 100% EOU against CT-3 (deemed exports). The Commissioner (Appeals) rightly held that the object of Rule 5 permits refund in cases of deemed export and relied on an array of judgments supporting that view. The Tribunal further observed that the Supreme Court and other decisions relied upon by Revenue did not deal with the specific question of inputs used in manufacture of goods supplied to a 100% EOU and therefore were not directly on point. Having regard to earlier orders of this Tribunal in the respondent's own case for an earlier period, which treated the term 'export' in Rule 5 consistently pre- and post-amendment, the Tribunal found no infirmity in the Commissioner (Appeals) order allowing the refunds and concluded that Revenue's appeal lacked merit. [Paras 3, 4]Revenue's appeal is dismissed and the Commissioner (Appeals) order allowing the refunds is confirmed.Final Conclusion: The Tribunal dismissed the Revenue appeal and confirmed the Commissioner (Appeals) order holding that refunds of unutilised CENVAT credit under Rule 5 are admissible for goods supplied to a 100% EOU (deemed export), on the grounds that the sanctioning authority's narrow interpretation was incorrect and prior relevant precedents support refund in such cases. Issues:Grant of refund of unutilised CENVAT credit for goods supplied to 100% Export Oriented Unit (EOU) under Rule 5 of CENVAT Credit Rules, 2004.Analysis:The appeal challenges the grant of refund by the Commissioner (Appeals) to the appellant for unutilised CENVAT credit accumulated against inputs and input services used for goods manufacture supplied to a 100% EOU. The Revenue-Department contests the legality of the order allowing the refunds. The factual background involves the appellant, a manufacturer of Printed Aluminium Foils, supplying goods to a 100% EOU for export between October 2012 and March 2013. Refund claims amounting to Rs. 14,05,908/- and Rs. 10,24,576/- were filed under Rule 5 of CENVAT Credit Rules, 2004. The Deputy Commissioner issued show-cause notices proposing to reject the refund claims, which were subsequently rejected through adjudication orders. However, the Commissioner of Central Excise (Appeals) allowed both refunds, leading to the appeal by the Department of Revenue.The Commissioner (Appeals) observed that the refund sanctioning Authority had misinterpreted Rule 5 of the CENVAT Credit Rules, 2004. The Assistant Commissioner's view that refunds under this rule are only permissible for goods exported out of India, and not for finished goods cleared to 100% EOU against CT-3, was deemed erroneous. The Commissioner held that the spirit behind Rule 5 is to allow refunds of CENVAT credit against deemed exports as well. Several judgments were cited to support this interpretation, including NBM Industries, Elcomponics Sales, and others. The Commissioner also noted the inapplicability of judgments such as M/s Priya Blue Industries Ltd. vs. CC (Prev) and decisions of various High Courts, as they did not involve the issue of using inputs in goods supplied to 100% EOU. The Commissioner's decision was further supported by a previous Tribunal order in the respondent's case, which allowed a refund for a period prior to the one under dispute.In light of the above analysis, the Tribunal dismissed the appeal and confirmed the order passed by the Commissioner of Central Excise & Customs (Appeals), Nashik, allowing the refunds. The order was pronounced in open court on 15.11.2019.