Refund of unutilised CENVAT credit for supplies to 100% EOU treated as deemed export; refund permitted.

Supplies to a 100% EOU qualify as deemed exports and unutilised CENVAT credit attributable to such supplies is refundable under the CENVAT regime; this position follows consistent judicial precedent rejecting the Departments denial of refunds where clearances to another EOU were treated as non-export, and therefore refund claims filed for the relevant period must be allowed. The denial of refund on grounds that transfers between EOUs are not export was held unsustainable and the revenue appeal against refund eligibility was dismissed.

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Issues: Whether unutilised CENVAT credit refund under Rule 5 of the CENVAT Credit Rules, 2004 is admissible in respect of clearances made to a 100% EOU (treated as deemed exports) where the goods are ultimately exported by the EOU.

Analysis: Rule 5 of the CENVAT Credit Rules, 2004 provides for refund of unutilised CENVAT credit on exports. Notifications and amendments (notably Notification No. 27/2012-Central Excise (NT) and Notification No. 6/2015-Central Excise (NT) introducing Explanation 1A) and departmental communications address the treatment of exports and the operative period. Conflicting authorities exist: some decisions restrict Rule 5 refunds to physical exports only, while other tribunal and high court decisions treat supplies to EOUs (deemed exports) as eligible where the clearances are part of the chain leading to goods being taken out of India. Where the facts show that goods cleared to a 100% EOU are ultimately exported and the refund claim arises from reversal of CENVAT credit in the claimant's accounts, precedents of the tribunal and the jurisdictional high court support allowing refund entitlement despite the deemed-export character of the intermediate clearance. The departmental position based on Notifications and certain later authorities was considered but the matter was decided by reference to binding regional precedent holding that supplies to EOUs in such circumstances fall within Rule 5 entitlement.

Conclusion: In favour of the assessee. Refund under Rule 5 is held admissible in respect of clearances to a 100% EOU which are ultimately exported; the departmental appeal is dismissed.

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