2022 (8) TMI 311 - HC - Central Excise

High Court grants refund of excise duty to petitioner converting from EOU to non-EOU unit

ERCON COMPOSITES Versus UNION OF INDIA

The High Court allowed the petitions, setting aside the orders that reversed decisions in favor of the petitioner regarding the refund of excise duty paid ... 100% EOU - de-bonding - refund of the excise duty previously paid - main focus of the revisional authority was that the EOU unit and the DTA unit were not the same entity, for which purpose, the authority referred to the central excise registration numbers - HELD THAT:- Shorn of legal technicalities what emerges is that the petitioner as a 100% EOU would have made purchases of raw material and inputs from the local market without payment of excise duty as well as not born duty on final product manufactured by it on a promise that the final product would be eventually exported. When it showed the desire to convert itself from 100% EOU to DTA, as per requirement of law, it had to pay up the excise duty on such purchases and final product where duty was previously not collected. Admittedly, such duty was paid at the time of what is referred to de-bonding. However, this would not prevent the exporter from claiming refund of excise duty if the goods are eventually exported. The petitioner as a DTA unit exported the goods and claimed refund of excise duty previously paid in its capacity as an EOU. There is no procedure in law to deprive the petitioner from such benefit. The appellate authority has correctly discussed the legal position. The revisional authority has committed error in reversing the said order. Petition allowed. Issues Involved:Challenge to order reversing appellate and adjudicating orders in favor of petitioner regarding refund of excise duty paid upon conversion from Export Oriented Unit (EOU) to non-EOU unit.Analysis:1. Conversion from EOU to non-EOU Unit:The petitioner established a manufacturing unit initially as a 100% EOU and later converted it to a non-EOU unit. Upon conversion, excise duty on goods previously waived as an EOU was paid. The petitioner then exported finished products from the Domestic Tariff Area (DTA) and sought a refund of the excise duty paid. The adjudicating and appellate authorities accepted the request, but the revisional authority reversed the decision based on the argument that EOU and DTA units were not the same entity due to different central excise registration numbers.2. Legal Position and Benefit of Refund:The appellate authority discussed the issue of refund availability in detail, emphasizing that duty on exported goods was paid upon de-bonding from EOU status to a DTA unit. The duty was required to be paid before exiting the bonded status, and the petitioner had paid duty on finished goods and foregone inputs and capital goods. The appellate authority clarified that the duty was paid at the time of de-bonding to withdraw all EOU benefits, and there was no need to pay duty again upon export as the unit remained the same despite the change in status. The place of removal for export goods was determined to be the port of export, and the expenses up to the port were included in the transaction value for duty calculation.3. Error by Revisional Authority:The revisional authority's decision to deny the refund benefit based on the premise that EOU and DTA units were different entities was challenged. The High Court found that the revisional authority erred in its interpretation, as the central excise registration numbers were identical for both units. The petitioner, as a former EOU now operating as a DTA unit, was entitled to claim a refund of excise duty paid upon export of goods, as there was no legal procedure to deprive them of this benefit.4. Conclusion and Court Decision:The High Court allowed the petitions, setting aside the impugned orders that reversed the appellate and adjudicating decisions in favor of the petitioner. The Court emphasized that the petitioner, upon converting from EOU to DTA, had fulfilled the legal requirements by paying the necessary excise duty and was entitled to claim a refund upon exporting the goods. The revisional authority's decision was deemed erroneous, and the appellate authority's position on the legal aspects was upheld.In summary, the High Court's judgment upheld the petitioner's right to claim a refund of excise duty paid upon conversion from EOU to non-EOU unit and subsequent export of goods from the DTA, emphasizing the legal compliance and entitlement to such a refund despite the revisional authority's contrary decision based on the entity distinction between EOU and DTA units.