2018 (11) TMI 74 - AT - Central Excise

Refund of CENVAT Credit - supplies to 100% EOU - rejection on the ground that Rule 5 of CCR read with N/N. 27/2012-CE (NT) dated 18.06.2012 grants refund of accumulated CENVAT credit only in respect of exports and not in respect of supplies to 100% EOUs - Held that - In an identical matter in the case of Sai Polymers 2017 (5) TMI 671 - CESTAT HYDERABAD this very bench had held that Rule 5 of CCR also entitles one to refund of CENVAT credit in case of deemed exports by way of supply to 100% EOU prior to the introduction of explanation (1A) - refund allowed - appeal dismissed - decided against Revenue.

Summary

Issues:
1. Refund of accumulated CENVAT credit under Rule 5 of CCR for supplies to 100% EOUs.
2. Interpretation of the term 'exports' under Rule 5 of CCR.
3. Applicability of Rule 5 of CCR prior to the introduction of explanation (1A).

Analysis:
Issue 1: The appeal was filed by the Revenue against the rejection of refund of CENVAT credit for supplies to 100% EOUs. The original authority denied the refund, stating that Rule 5 of CCR did not cover deemed exports to 100% EOUs. The first appellate authority, however, allowed the refund, emphasizing that the law at the relevant time did not explicitly exclude deemed exports from the definition of exports under Rule 5.

Issue 2: The first appellate authority referred to amendments in Rule 5 of CCR and held that the term 'exports' had a broader interpretation before the introduction of explanation (1A). The authority cited judicial precedents, including the decision of the Hon'ble Gujarat High Court, to support the view that supplies to 100% EOUs could be considered exports for the purpose of refund under Rule 5.

Issue 3: The Revenue argued that refund could not exceed the scope of Rule 5, which did not mention refunds for deemed exports to 100% EOUs. However, the respondent contended that during the period in question, Rule 5 did not exclude supplies to 100% EOUs. The Bench relied on its previous decision in a similar case and upheld that supplies to 100% EOUs were eligible for refund under Rule 5 before the introduction of explanation (1A).

In conclusion, the Bench rejected the appeal and upheld the impugned order, stating that the appellant was entitled to the refund of accumulated CENVAT credit under Rule 5 of CCR for supplies to 100% EOUs before the introduction of the explanatory clause. The decision was based on the interpretation of the term 'exports' under Rule 5 and supported by relevant judicial precedents and previous rulings of the Bench.