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 Oriented Unit (EOU) under Rule 5 of CENVAT Credit Rules, 2004. The Commissioner's interpretation that refunds are permissible for goods supplied to 100% EOU against CT-3 was deemed correct, in line with the spirit of the rule to allow refunds for deemed exports. The Tribunal dismissed the Revenue Department's appeal, affirming the refund orders issued by the Commissioner (Appeals).

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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.

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