2017 (7) TMI 756 - AT - Central Excise

Refund claim - deemed exports - denial on the ground that clearances which are effected to 100% EOUs, cannot be equated to physical exports and hence Provisions of Rule 5 do not get attracted - Held that - First Appellate Authority after considering the submissions made before him by the assessee/respondent as also various decisions, has correctly held that the refund of accumulated CENVAT credit under Rule 5 of CCR, 2004 in respect of clearances made to 100% EOU is admissible - appeal rejected - decided against Revenue.

Summary

Issues:
- Eligibility of respondent to avail CENVAT credit on inputs for manufacturing goods sold to 100% EOU

Analysis:
The judgment revolves around the issue of whether the respondent is entitled to claim a refund of CENVAT credit on inputs used for manufacturing goods sold to 100% EOU. The adjudicating authority initially rejected the refund claims, stating that clearances to 100% EOUs cannot be equated to physical exports, hence Rule 5 does not apply. However, the First Appellate Authority overturned this decision, emphasizing that the clearances made to 100% EOUs should be treated as exports for the purpose of claiming refund under Rule 5 of the CCR, 2004.

The tribunal analyzed the relevant legal provisions and precedents to determine the eligibility of the respondent for the refund. It noted that during the relevant period, Rule 5 of the CCR and Notification No. 27/2012-CE allowed for a refund of duty paid on inputs used in manufacturing final products cleared for export under bond or LUT. The tribunal highlighted that the law did not explicitly exclude deemed exports from the definition of exports before the amendment in Rule 5 post-March 2015. Referring to judicial decisions and government orders, including the case of Bhuwalika Steel Industries and Commissioner Vs. Metflow Cast (P) Ltd., the tribunal concluded that clearances to 100% EOUs should be considered exports for the purpose of claiming CENVAT credit refund.

Moreover, the tribunal cited decisions from the Hon'ble Gujarat High Court and the CESTAT, Hyderabad Bench, which supported the eligibility of deemed exports for refund under Rule 5. It acknowledged a dissenting view from the Madras High Court but gave more weight to the latest decisions aligning with the law amended in 2015. The tribunal also considered a previous order by the same bench in favor of the appellant on a similar issue, reinforcing the decision to allow the refund of accumulated CENVAT credit for clearances to 100% EOU during the specified period.

In light of the consistent legal interpretations and precedents, the tribunal rejected the revenue's appeals, affirming the respondent's entitlement to the refund of accumulated CENVAT credit under Rule 5 of the CCR, 2004 for clearances made to 100% EOU. The judgment emphasized the importance of treating clearances to 100% EOUs as exports for refund purposes, aligning with the amended legal provisions and judicial pronouncements.