2011 (9) TMI 360 - HC - Central Excise

Allowability of refund of Cenvat credit availed on inputs used in the manufacture of goods cleared by DTA unit to a 100% Export Oriented Unit - Held that - Reliance placed on judgement of High Court in COMMR. OF CENTRAL EXCISE Versus SHILPA COPPER WIRE INDUSTRIES (2010 -TMI - 205858 - GUJARAT HIGH COURT) and Ginni International Ltd.(2001 -TMI - 50798 - CEGAT, COURT NO. IV, NEW DELHI) - once Development Commissioner giving permission to the appellant, a 100% EOU, to sell goods in DTA up to a specified value, Revenue cannot go beyond the permission and dispute it holding that for fixing the limit only physical exports and not deemed exports should have been taken into account. Thus clearances made by one 100% EOU to another 100% EOU which are deemed exports are to be treated as physical exports for the purpose of entitling refund of unutilized Cenvat credit contemplated under the provisions of Rule 5 of the Cenvat Credit Rule, 2004. Apex Court in the case of Virlon Textile Mills Ltd. v. Commissioner of C.Ex. Mumbai, 2007 (2007 -TMI - 1260 - SUPREME COURT OF INDIA), though not in identical situation while examining the nature of DTA sales to 100% export oriented units observed that DTA sales against foreign exchange or other supplies in India can be equated with physical exports. - The appeal of revenue is dismissed.

Summary

Issues:
Entitlement to refund of Cenvat credit on inputs used in the manufacture of goods cleared by DTA units to 100% export oriented unit.

Analysis:
The High Court considered the appeal by the Revenue against the Tribunal's judgment, focusing on the entitlement of the manufacturer to refund Cenvat credit on inputs used in the production of goods cleared by DTA units to 100% export-oriented units. The primary contention of the Revenue was that such a refund should not be granted as Rule 5 of the Cenvat Credit Rules does not encompass this scenario, and only physical exports should qualify for a refund. The Court noted that a similar issue had been addressed by a Division Bench in a previous case. The key question revolved around whether clearances made by one 100% EOU to another, deemed as exports, should be treated as physical exports for the purpose of refunding unutilized Cenvat credit under Rule 5 of the Cenvat Credit Rules, 2004.

The Division Bench, after considering detailed submissions, relied on previous decisions and observed that the issue raised by the Revenue was already settled by various judgments. The Court referred to specific cases where the Apex Court had dismissed appeals by the Revenue, emphasizing that once the Development Commissioner permits a 100% EOU to sell goods in DTA up to a specified value, the Revenue cannot dispute it based on the distinction between physical exports and deemed exports. The Court highlighted that the legal position was well-established, and there was no need to await further decisions from the Apex Court.

The Revenue's counsel mentioned a different view taken by a Division Bench of the Madras High Court, but the High Court held that they were bound by their own decision on the issue. Additionally, the Court cited a previous Apex Court decision where DTA sales to 100% export-oriented units were equated with physical exports, further supporting their stance. Consequently, the Court dismissed the Tax Appeal, maintaining consistency with its previous rulings and established legal principles.

In conclusion, the High Court upheld the Tribunal's decision, affirming that clearances made by one 100% EOU to another, deemed as exports, should be treated as physical exports for the purpose of refunding unutilized Cenvat credit under Rule 5 of the Cenvat Credit Rules, 2004. The Court's analysis emphasized the settled legal position and the precedents set by previous judgments, ultimately leading to the dismissal of the Revenue's appeal.