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Issues: (i) Whether a 100% Export Oriented Unit that had paid central excise duty on exports was entitled to re-credit of the amount in its Cenvat account. (ii) Whether rebate could be denied to a merchant exporter on the ground that the export value was allegedly inflated.
Issue (i): Whether a 100% Export Oriented Unit that had paid central excise duty on exports was entitled to re-credit of the amount in its Cenvat account.
Analysis: The export by a 100% Export Oriented Unit was exempt from duty under the governing notification, and the duty had been paid only because of an erroneous understanding of liability. Once the appellant withdrew the refund claim and sought re-credit, the department could not retain duty collected without authority of law. The request for re-credit was a legitimate consequential claim and was supported by the settled principle that duty not payable cannot be appropriated by the Revenue.
Conclusion: The appellant was entitled to re-credit of the Cenvat amount paid for the export clearances.
Issue (ii): Whether rebate could be denied to a merchant exporter on the ground that the export value was allegedly inflated.
Analysis: The goods were purchased from the supplier on duty-paid invoices, exported after processing, and the export declaration was not rejected by the customs authorities. The department did not establish any collusion, fraud, or suppression between the appellant and the supplier, nor did it prove that the declared export price was unreal or below contemporaneous export value. In the absence of such proof, the merchant exporter could not be denied rebate merely because the supplier's valuation or payment of duty was questioned at the supplier's end.
Conclusion: The rebate claim could not be denied and the appellant was entitled to rebate on the declared export value.
Final Conclusion: The impugned order was set aside and the appellant succeeded on both the re-credit and rebate claims.
Ratio Decidendi: Duty paid on exports by a 100% Export Oriented Unit, where such duty was not legally payable, cannot be retained by the Revenue, and rebate to an exporter cannot be denied unless the department proves fraud, collusion, or wilful misstatement causing the alleged short payment or inflated valuation.
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