2019 (12) TMI 1057 - AT - Central Excise

Appellant entitled to refund of Cenvat Credit for supplies to Export Units under Rule 5

M/s Polycom Associates Versus C.C.E. & S.T. Daman

The court held that the appellant was entitled to a refund of accumulated Cenvat Credit under Rule 5 for supplies to 100% Export Oriented Units, treating ... Refund of accumulated CENVAT Credit - export or goods or not - input used in the manufacture of final product which has been supplied to 100% EOU considering the same as export or otherwise - whether the supply to 100% EOU is considered as export for the purpose of refund under Rule 5 of Cenvat Credit Rules, 2002? HELD THAT:- The very same issue has been considered by the Hon’ble Gujarat High Court in the case of COMMISSIONER - CENTRAL EXCISE AND CUSTOMS VERSUS NBM INDUSTRIES [2011 (9) TMI 360 - GUJARAT HIGH COURT] where it was held that clearances made by one 100% EOU to another 100% EOU which are 'deemed exports' are to be treated as physical exports for the purpose of entitling refund of unutilized Cenvat credit contemplated under the provisions of Rule 5 of the Cenvat Credit Rule, 2004. Thus, there is no dispute that refund under Rule 5 is admissible in respect of the supply made to 100% EOU - It is also observed that the definition of export of goods has been given in Rule 5 has been amended and as per the new definition only those exports where the goods are taken out of country is considered as an export of goods, therefore, at the most the refund under Rule 5 may not be admissible after 01.03.2015 which is further make it explicit that prior to this amendment refund in respect of export made to 100% EOU was permissible. Appeal allowed - decided in favor of appellant. Issues Involved:1. Entitlement for refund of accumulated Cenvat Credit under Rule 5 for inputs used in the manufacture of final products supplied to 100% Export Oriented Units (EOUs).2. Interpretation of 'deemed export' versus 'physical export' under Rule 5 of the Cenvat Credit Rules, 2004.3. Applicability of precedents and binding decisions from higher courts on adjudicating authorities.Issue-wise Detailed Analysis:1. Entitlement for Refund of Accumulated Cenvat Credit:The primary issue in this case revolves around whether the appellant is entitled to a refund of accumulated Cenvat Credit under Rule 5 for inputs used in the manufacture of final products supplied to 100% EOUs. The appellant argued that such supplies should be treated as exports, making them eligible for refunds. This argument was supported by precedents from the Hon'ble Gujarat High Court in the cases of Commissioner of Central Excise & Customs vs. NBM Industries and EI Dupont India Pvt. Ltd. vs. UOI, which upheld the eligibility for refunds in similar circumstances.2. Interpretation of 'Deemed Export' vs. 'Physical Export':The court had to determine whether supplies to 100% EOUs qualify as 'deemed exports' and if they should be treated as 'physical exports' for the purpose of refunds under Rule 5. The Hon'ble Gujarat High Court in NBM Industries addressed this issue, stating that clearances made by one 100% EOU to another should be treated as physical exports, thereby entitling the manufacturer to a refund of unutilized Cenvat credit. This interpretation was reinforced by the court's decision in EI Dupont India Pvt. Ltd., which emphasized that refunds should not be denied on the grounds of deemed export versus physical export.3. Applicability of Precedents and Binding Decisions:The court highlighted the importance of adhering to precedents and binding decisions from higher courts. Despite the adjudicating authority's reliance on a different view taken by the Madras High Court in BAPL Industries Ltd., the Gujarat High Court's decisions in NBM Industries and EI Dupont India Pvt. Ltd. were binding. The court criticized the adjudicating authority for not following these binding precedents, emphasizing that lower authorities must adhere to the decisions of higher appellate authorities to maintain judicial discipline and avoid unnecessary litigation.The court referred to various judgments, including the Supreme Court's decision in Kamlakshi Finance Corporation Ltd., which underscored the obligation of revenue officers to follow the decisions of appellate authorities. The court also referenced the Bombay High Court's ruling in Legrand (India) Pvt. Ltd., which stated that all authorities and subordinate tribunals must follow the law laid down by the highest court in the state, even if the decision was in the case of another assessee.Conclusion:The court concluded that the appellant was entitled to a refund of accumulated Cenvat Credit under Rule 5 for supplies made to 100% EOUs, as these should be treated as physical exports based on binding precedents. The court set aside the impugned order and allowed the appeal, emphasizing the need for adjudicating authorities to follow binding decisions from higher courts to ensure judicial discipline and avoid unnecessary harassment and litigation.