Rule 5 refund on deemed export to a 100% EOU depends on proof of ultimate export and factual verification.

Refund of unutilised Modvat credit under Rule 5 of the Cenvat Credit Rules, 2001 was considered for inputs used in goods cleared to a 100% export oriented unit as deemed export. The Tribunal noted that such clearance is not export in the strict sense, and a deemed export cannot be treated as export for all purposes. However, Rule 5 does not require direct factory-to-export clearance, and refund may still be available if the final products are ultimately exported. On the record before it, ultimate export was not proved, so refund could not be sustained without factual verification. The matter was remanded for fresh decision by the original authority.

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Issues: Whether refund of unutilised Modvat credit under Rule 5 of the Cenvat Credit Rules, 2001 was admissible in respect of inputs used in goods cleared to a 100% export oriented unit as deemed export, and whether the matter required verification of ultimate export before grant of refund.

Analysis: Clearance to a 100% EOU is not export in the strict sense, because the Excise Act contains no definition of export and the expression must be understood by reference to the Customs Act and common parlance. A deemed export created by legal fiction for a limited purpose cannot be treated as export in a blanket manner. At the same time, Rule 5 speaks of inputs used in final products cleared for export under bond, and it does not require that the goods must be directly cleared from the factory for export. If the final products are ultimately exported, refund may be admissible. On the record before the Tribunal, the fact of ultimate export was not established.

Conclusion: Refund could not be upheld on the existing record, but the assessee was entitled to have the factual question of ultimate export verified by the original authority. The matter was therefore sent back for fresh decision.

Ratio Decidendi: For the purpose of Rule 5, deemed export to a 100% EOU is not automatically equivalent to export, but refund may still be available where the goods are ultimately exported and the relevant facts are proved.

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