2019 (3) TMI 510 - AT - Central Excise

Refund of CENVAT Credit - clearances to 100% EOU - deemed exports - rejection on the ground of disbarment owing to export under claim for rebate which was, therefore, in dissonance with the second proviso to rule 5 of CENVAT Credit Rules, 2004 -rule 18 of Central Excise Rules, 2002 - Held that - The sole reason for rejection of the refund claim is rendered unsustainable. The upholding of the rejection of this very claim of refund on a different ground by the first appellate authority is contrary to the principles of natural justice. The first appellate authority has approved of the order of rejection of the claim for refund for the subsequent period on the ground of availment of the privilege of export under claim for rebate during the same period while claiming the refund on deemed exports effected to eligible entities - We find a logical inconsistency in this finding; export under claim for rebate, as per rule 18 of Central Excise Rules, 2002, is restricted to, and applicable only for, physical exports. There is no scope for invoking the privilege of rule 18 of Central Excise Rules, 2002 for clearances effected to 100% Export Oriented Units licensed in accordance with the Foreign Trade Policy notified under the Foreign Trade (Development & Regulation) Act, 1992. The impugned order is flawed and the appellant-assessee is entitled to the claim for refund of accumulated CENVAT credit of duties/taxes on inputs/input services used in the manufacture of goods supplied as deemed exports - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Refund of CENVAT credit for two periods related to deemed exports to 100% Export Oriented Units.
2. Rejection of refund claims based on the distinction between physical exports and deemed exports.
3. Appeal against the rejection of refund claims by the first appellate authority.
4. Legal position regarding refund entitlement for deemed exports under Rule 5 of CENVAT Credit Rules, 2004.
5. Applicability of rule 18 of Central Excise Rules, 2002 to clearances to 100% Export Oriented Units.

Issue 1: The judgment pertains to the refund claims of CENVAT credit by M/s Nash Industries (I) Pvt Ltd for two periods related to deemed exports to 100% Export Oriented Units, which were rejected by the original authority but allowed by the first appellate authority. The claims were made under Rule 5 of CENVAT Credit Rules, 2004, for clearances effected during specific periods.

Issue 2: The rejection of refund claims was based on the distinction between physical exports and deemed exports, with the original authority disallowing the refund due to the applicability of the second proviso to Rule 5. The rejection was upheld on the grounds of indirect receipt of benefits and the coalescing of both categories of exports for computation of export turnover.

Issue 3: The judgment discusses the appeal against the rejection of refund claims by the first appellate authority, highlighting procedural irregularities and the vitiating effect of raising a fresh ground for rejection not indicated to the appellant.

Issue 4: The legal position regarding refund entitlement for deemed exports under Rule 5 of CENVAT Credit Rules, 2004, is analyzed in light of precedents cited by the High Court of Karnataka, emphasizing that deemed exports to 100% Export Oriented Units qualify for refund of unutilized CENVAT credit.

Issue 5: The applicability of Rule 18 of Central Excise Rules, 2002 to clearances to 100% Export Oriented Units is discussed, with the judgment emphasizing the logical inconsistency in invoking the privilege of export under claim for rebate for such clearances, as it is restricted to physical exports only.

In conclusion, the judgment finds in favor of the appellant, allowing the refund of accumulated CENVAT credit for deemed exports to 100% Export Oriented Units. The impugned order is set aside, and the appeals of the assessee are allowed with consequential relief, while the appeal of Revenue is dismissed.