2010 (6) TMI 434 - HC - Central Excise

Refund - unjust enrichment -100% EOU - raw materials received by the respondent from other 100% EOUs if indigenous origin, the respondent would be eligible for refund - subject to verification of the aspect of unjust enrichment Held that - nature of the raw materials required to be verified as to whether the same were of indigenous nature or not - no infirmity can be found in the impugned order of the Tribunal in directing that the claim of the respondent be considered after verification the nature of the raw material - appeal is dismissed

Summary

Issues:
1. Interpretation of Exemption Notification No. 8/97
2. Treatment of inter-unit sales between Export Oriented Units (EOUs)
3. Distinction between Export Oriented Unit and Domestic Tariff Area Unit
4. Classification of goods manufactured by 100% EOU
5. Verification of raw materials received by the assessee
6. Eligibility for refund subject to verification of Unjust Enrichment aspect

Interpretation of Exemption Notification No. 8/97:
The appellant-revenue challenged an order by the Tribunal regarding the interpretation of Exemption Notification No. 8/97. The Tribunal had to determine if the practice adopted by the assessee would defeat the purpose of the exemption. The Tribunal also had to decide if the assessee was entitled to the benefits of the exemption and if inter-unit sales between EOUs could be treated similarly to supplies by a Domestic Tariff Area Unit to an EOU. The Tribunal was tasked with considering if there was a clear distinction between Export Oriented Units and Domestic Tariff Area Units, and if goods manufactured by a 100% EOU could be classified as 'goods manufactured in India.'

Treatment of Inter-Unit Sales between EOUs:
The respondent, engaged in garment manufacturing, filed a refund claim based on duty calculations under different notifications. The Deputy Commissioner initially rejected the claim, stating that goods received from a 100% EOU are deemed as imported raw materials. However, the Commissioner (Appeals) allowed the appeal, considering duty-free raw materials from one EOU to another as procurement from an indigenous source. The Tribunal upheld this decision, emphasizing the need to verify the origin of raw materials from other EOUs for the refund claim.

Verification of Raw Materials Received by the Assessee:
The Tribunal directed the authority to verify if all raw materials received by the respondent from other EOUs were of indigenous origin. The Tribunal emphasized the importance of this verification before granting the refund claim, subject to the aspect of unjust enrichment. The Tribunal's decision was based on the need to confirm the nature of raw materials received by the assessee from 100% EOUs before considering the refund claim.

Conclusion:
The High Court dismissed the appeal, noting that none of the proposed questions arose from the Tribunal's order. Since there was no legal infirmity in the Tribunal's decision, the appeal was rejected. The Court upheld the Tribunal's direction to verify the nature of raw materials before considering the refund claim, emphasizing the importance of confirming the indigenous origin of materials received from other EOUs.