2017 (5) TMI 1192 - HC - Central Excise

Refund of CENVAT credit - supplies to 100% EOU - whether the Auto components supplied by the respondent to the 100% EOU amounts to deemed export? - Held that - sale to 100% EOU is virtually in the nature of export as 100% EOU can not sell its products in local market and is obliged to export its entire production. Therefore, such sale is deemed export having all the elements of export - export takes into its fold deemed export as well and no distinction can be drawn between export and deemed export - refund allowed - appeal dismissed - decided against Revenue.

Summary

Issues:
- Refund of CENVAT Credit for deemed export to 100% EOU

Analysis:
The respondent, engaged in manufacturing auto components, supplied these items to a 100% export-oriented unit (EOU) without payment of dues against a CT-3 certificate. The respondent sought a refund of CENVAT Credit on raw material purchases for manufacturing the auto components, which was rejected by the adjudicating authority and Commissioner (Appeals) but allowed by the CESTAT, considering the supply to the EOU as deemed export. The Central Excise Department appealed the CESTAT decision, questioning the justification of refunding CENVAT Credit under Rule 5 of the CENVAT Credit Rules. The Gujrat High Court's decisions in similar cases supported the concept of deemed export for refund entitlement under the Rules, emphasizing that deemed export should be considered for refund purposes. The Madras High Court's contrary decision was not followed, as the Gujrat High Court's rulings, based on Supreme Court precedents, were deemed conclusive and final.

The Gujrat High Court's decisions were further upheld in subsequent cases, establishing the validity of treating sales to 100% EOU as deemed export due to the obligation of EOUs to export their entire production. The court highlighted that deemed export is encompassed within the concept of export, with no distinction between the two. Consequently, the tribunal's decision to allow the refund of CENVAT Credit to the respondent under the CENVAT Credit Rules was deemed appropriate, leading to the dismissal of the appeal by the High Court. The judgment affirmed the legality of considering sales to 100% EOU as deemed export for refund purposes, in line with the established legal precedents and interpretations of the relevant rules.