2018 (8) TMI 890 - AT - Central Excise

Refund claim - deemed exports - goods supplied to Mega Power Project under International Competitive Bidding, which is deemed export in terms of Foreign Trade Policy - Rule 5 of Cenvat Credit Rules, 2004. Whether the goods supplied to a Mega Power Project, treated as deemed export in terms of Foreign Trade Policy, are eligible for refund under the provisions of Rule 5 of Cenvat Credit Rules, 2004 for the period from March, 2015 to June, 2015? Held that - The refund of unutilized credit on inputs is governed by rules made or any notification issued under Central Excise Act, 1944. Accordingly, Rules 5,5A and 5B of CCR, which are the only rules made for such refunds are in complete harmony with Section 11B (2) (c) of the Act since CCR, 2004 have been made under Section 37 of Central Excise Act, 1944. Thus, there is no contradiction or conflict between Section 11B and Rule 5 of Cenvat Credit Rules. As a result, the contention that Rule 5 is supplanting the Section 11B is patently fallacious. It is therefore clear that Section 11B allows refunds in accordance with Rule 5 of CCR and Notifications issued under the Act and any restrictions made by legislature in this Rule on any category of exports etc. are not contrary to the said Section. In the instant case there is no conflict between the primary statute and the delegated provisions as the primary statute has made the provision of allowing the refunds as per Rule 5 of CCR and Notification issued under the Act and any restriction made in the said Rules on any category of exports imposed by legislature is in consonance with the Section 11B of the Act. The specific inclusion of clause (1A) in Rule 5 bid clearly shows the legislative intent to allow refund facility to actual physical exports. As the right to refund for exports other than physical exports did not accrue under law, which in the impugned period is permitted for physical exports only, there is no conflict between Rule 3, 4 and 5 of Cenvat Credit Rules. Appeal dismissed - decided against appellant.

Issues Involved:
1. Eligibility of refund claims under Rule 5 of Cenvat Credit Rules, 2004.
2. Interpretation of Section 11B of the Central Excise Act, 1944.
3. Applicability of deemed exports for refund claims.
4. Harmonious construction of Rule 5 of CCR and Section 11B.
5. Legislative intent and statutory interpretation.

Detailed Analysis:

1. Eligibility of Refund Claims under Rule 5 of Cenvat Credit Rules, 2004:
The appellant filed refund claims for the quarters ending January to March 2015 and April to June 2015, citing deemed exports under the Foreign Trade Policy. The adjudicating authority rejected these claims, and the Commissioner (Appeals) partially upheld this decision. The appellant argued that Rule 5 of CCR does not deal with deemed exports and that refunds should be governed by the parent Act, Section 11B. The Tribunal found that the appellant filed the refund claims under Rule 5, making it applicable. The amendment to Rule 5, effective from 1.3.2015, restricted refunds to physical exports, excluding deemed exports. Thus, the claims for periods after 1.3.2015 were correctly rejected.

2. Interpretation of Section 11B of the Central Excise Act, 1944:
The appellant contended that Section 11B, being the principal legislation, should prevail over Rule 5 of CCR. The Tribunal noted that Section 11B(2)(c) allows refunds of credit on inputs in accordance with rules made under the Act, indicating no conflict between Section 11B and Rule 5. The Tribunal held that Rule 5 is in harmony with Section 11B and that any restrictions in Rule 5 are consistent with the legislative intent.

3. Applicability of Deemed Exports for Refund Claims:
The appellant argued that Rule 5 should not exclude deemed exports from refunds. The Tribunal found that the amendment to Rule 5 explicitly restricted refunds to physical exports, reflecting the legislative intent. The Tribunal emphasized that what is not included by necessary implication stands excluded, thus deemed exports are not eligible for refunds under the amended Rule 5.

4. Harmonious Construction of Rule 5 of CCR and Section 11B:
The appellant urged for a harmonious interpretation of Rule 5 and Section 11B, arguing that Rule 5 should not make other provisions otiose. The Tribunal found no contradiction between Section 11B and Rule 5, stating that refunds under Section 11B are enabled by rules made under the Act. The Tribunal cited the Larger Bench decision in Steel Strips vs. CCE, which held that refund claims are not a vested right and are subject to statutory provisions.

5. Legislative Intent and Statutory Interpretation:
The Tribunal emphasized the importance of legislative intent and statutory interpretation, stating that the clear wording of Rule 5 and Section 11B must be given effect. The Tribunal rejected the appellant's argument that the amendment to Rule 5 was beyond the scope of the statute, noting that the amendment was within the legislative framework and consistent with the primary statute.

Conclusion:
The Tribunal dismissed the appeals, upholding the Commissioner (Appeals) decision. The Tribunal found no infirmity in the rejection of refund claims for deemed exports post-1.3.2015, affirming that refunds are restricted to physical exports as per the amended Rule 5 of CCR. The Tribunal concluded that there is no conflict between Rule 5 and Section 11B, and the legislative intent to restrict refunds to physical exports is clear and unambiguous.

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